Standing Bid Options

Standing Bid Options provide protocols, lenders, and curators with guaranteed liquidity when markets are turbulent and traditional liquidity is unavailable. Think of it as insurance against illiquidity you pay an upfront premium to secure RAVA's standing bid on your asset, executable anytime at our transparent model price.

This works for any hard to price tokenized asset: RWA fund tokens, failed lender vault tokens, distressed positions, or any illiquid tokenized asset where traditional liquidity providers won't provide bids.

How It Works

The Core Mechanism

A Standing Bid Option is a put option on illiquid assets with transparent, oracle-based pricing:

Purchase: Pay 3 to 5% upfront premium to RAVA, secured in smart contract
Duration: Choose coverage period from 24 hours to 3 months
Coverage: Specify USDC amount you want guaranteed liquidity for
Execute: Sell to RAVA anytime before expiration at current oracle price
Settlement: If executed, premium returned minus 0.75% annualized origination fee
Expiration: If not executed, RAVA keeps premium as compensation for holding USDC liquid

Why This Matters

Traditional liquidity providers disappear exactly when you need them most. Standing Bid Options guarantee RAVA will buy your position at a transparent model price regardless of market conditions.

Key advantage: Unlike NAV based loans, the model price is transparent and hedgeable. You can see exactly which factors drive the price and hedge them in liquid markets.

Pricing Structure

Premium Rates (Asset Based)

Premium rates vary by asset class and risk tier, scaled by duration:

Hedge Funds AAA Tier: 3.0% base premium AA Tier: 3.5% base premium A Tier: 4.0% base premium

Private Equity AAA Tier: 4.0% base premium AA Tier: 4.5% base premium A Tier: 5.0% base premium

Venture Capital AAA Tier: 5.0% base premium AA Tier: 5.5% base premium A Tier: 6.0% base premium

Real Estate AAA Tier: 3.5% base premium AA Tier: 4.0% base premium A Tier: 4.5% base premium

Duration Multipliers

Premium scales non linearly with duration:

24 hours: 0.15 0.25x base premium 1 week: 0.4 0.6x base premium 1 month: 1.0x base premium (baseline) 3 months: 2.2 2.6x base premium

Example: AA Tier Hedge Fund 1 month: $50M coverage × 3.5% = $1.75M premium 24 hours: $50M coverage × 3.5% × 0.15 = $262.5K premium 3 months: $50M coverage × 3.5% × 2.2 = $3.85M premium

Origination Fee (If Executed)

If you execute the option: 0.75% annualized, calculated pro rata based on days held Premium is returned in full Net cost = origination fee only

Example: Execute after 15 days on $50M coverage Origination fee = $50M × 0.75% × (15/365) = $15,411 Premium returned = $1.75M Effective annualized cost = 0.75%

Settlement Value & Model Price

Floating Discount Model

Standing Bid Options use RAVA's Model Price Oracle for execution pricing:

V_settlement(t) = NAV(t) × (1 − [S + D(t)])

Where: NAV(t) = reported net asset value (updates per fund reporting) S = Static Discount (locked structural factors) D(t) = Dynamic Adjustment (real time market factors)

Why Floating Matters

The discount floats with market conditions it's not locked at purchase. This means:

If markets improve (discount narrows): Your option becomes less valuable You probably won't execute You paid premium for insurance you didn't need

If markets deteriorate (discount widens): Your option becomes more valuable Strong incentive to execute You benefit from guaranteed liquidity at RAVA's transparent model price

Real Time Updates

Settlement values update in real time as the oracle recalculates: Dynamic factors: Every 5 seconds based on market data NAV: When fund reports new NAV Static factors: Only change if fund structure changes

You can monitor your option's value 24/7 through the dashboard.

Hedging the Model Price

Transparent Factor Decomposition

The model price oracle breaks down into specific, hedgeable factors:

Dynamic Market Factors (can be hedged):

Credit Spreads → Hedge with CDX HY Index shorts
Risk Free Rate → Hedge with SOFR/Treasury futures
Market Volatility → Hedge with VIX futures
Liquidity Premium → Hedge with HYG/LQD relative value
Equity Beta → Hedge with S&P 500 or QQQ shorts

Static Structural Factors (cannot be hedged): Legal complexity Asset structure layers Manager quality Underlying asset liquidity

Hedge Cost vs Option Premium

For many protocols, hedging dynamic factors is cheaper than the option premium:

Example: $50M hedge fund position Standing bid option: $1.75M (3.5% for 1 month) Credit spread hedge: ~$39K (0.31% annualized × $50M × 1/12) Rate hedge: ~$12K (0.10% annualized × $50M × 1/12) Volatility hedge: ~$156K (1.25% annualized × $50M × 1/12)

Total hedge cost: ~$207K vs $1.75M option premium

Strategic Use Cases

Case 1: Buy option + hedge dynamic factors Total cost: $1.75M premium + $207K hedge cost = $1.96M Result: Fully protected against all risk (static + dynamic) If executed: Premium returned, only pay origination fee

Case 2: Buy option without hedging Total cost: $1.75M premium Result: Protected if discount widens for any reason Simpler, no hedge management required

Case 3: Skip option, hedge factors directly Total cost: $207K hedge cost Result: Protected against dynamic factors only Vulnerable to static factor realization or NAV drops No RAVA standing bid guarantee

Execution Scenarios

Scenario 1: Market Deterioration (Execute)

Initial State (Purchase): NAV: $150M Discount: 12% (purchase discount) Coverage: $50M Premium: $1.75M (3.5%) Duration: 30 days

Day 15 (Market selloff): NAV: $150M (unchanged) Discount: 18% (widened 6%) Settlement value: $150M × (1 0.18) = $123M Your coverage: $50M

Execute Option: Sell $50M coverage to RAVA at current oracle price Receive: $50M settlement value Premium returned: $1.75M Origination fee: $50M × 0.75% × (15/365) = $15,411 Net proceeds: $50M $15.4K + $1.75M = $51.73M

Effective outcome: Realized $50M + premium back for $15.4K cost (0.75% annualized)

Scenario 2: Market Stable (Expire)

Initial State (Purchase): Same as above

Day 30 (Expiration): NAV: $150M Discount: 12% (unchanged) Settlement value: $132M No execution needed

Result: Premium paid: $1.75M (kept by RAVA) Asset still worth $132M in settlement terms Cost of insurance: $1.75M

Interpretation: You paid for liquidity insurance you didn't need, but you had guaranteed access if needed.

Scenario 3: Market Improvement (Expire)

Initial State (Purchase): Same as above

Day 30 (Expiration): NAV: $155M (up 3.3%) Discount: 9% (tightened 3%) Settlement value: $155M × (1 0.09) = $141M

Result: Premium paid: $1.75M (kept by RAVA) Asset now worth more ($141M vs $132M) Won't execute option

Interpretation: Market improved, discount tightened, no execution needed. Premium was cost of insurance.

Use Cases by User Type

For Protocols & DAOs

Capital efficiency: Instead of holding large USDC reserves for redemptions, purchase standing bid options as needed Only tie up 3 to 5% premium vs 100% reserves Execute during market stress to honor redemptions Let expire during normal markets

For NAV Lenders

Credit enhancement: Purchase options on your loan book Backstop for when borrowers can't refinance Transparent pricing lets you calculate credit loss provisions accurately Execute options instead of liquidating collateral at fire sale prices

For Fund Managers

GP commitment coverage: Hedge your personal stake in your fund Purchase 3 month options on your management company stake Execute during market downturns if you need personal liquidity Much cheaper than over collateralized NAV loan

For Curators

Operational liquidity: Cover working capital needs Buy short duration options (24hr, 1 week) when needed Execute if you can't meet operational expenses Very low premium for short duration

For Failed Vault Token Holders

Distressed position liquidity: Exit failed lending positions without waiting for recovery Purchase options on failed vault tokens where recovery timeline is uncertain RAVA's oracle prices the remaining collateral value transparently Execute when you need liquidity instead of waiting months/years for distributions Get predictable exit value despite uncertain recovery process

Example: Hold $100K of failed vault tokens with uncertain collateral recovery Purchase 30 day option for 5% premium ($5K) RAVA's oracle estimates 40% recovery value = $40K settlement Execute immediately for $40K + $5K premium back origination fee Exit distressed position with transparent pricing instead of holding for unknown duration

Comparison to Alternatives

vs Traditional NAV Lending

NAV Loan: Opaque pricing (lender's internal model) Over collateralization required (50 to 70% LTV) Margin calls and forced liquidation Interest accrues continuously Can't exit early without penalties

Standing Bid Option: Transparent oracle pricing Full coverage up to NAV less discount No margin calls option can't be forced Only pay if executed (plus small origination fee) Execute anytime, no penalties

vs On Demand Liquidation Services

Liquidation Service: No upfront cost Uncertain execution (may not find buyer) Opaque pricing (negotiated) Speed depends on market No recourse if service can't execute

Standing Bid Option: Upfront premium Guaranteed execution Transparent oracle pricing Instant settlement on chain RAVA must execute if you choose

vs Holding USDC Reserves

USDC Reserves: 100% capital allocation Opportunity cost of not deploying capital Perfect liquidity but massive drag on returns No cost except opportunity cost

Standing Bid Option: 3 to 5% premium for coverage Deploy 95 to 97% of capital Liquidity available if needed Clear, predictable cost

Smart Contract Integration

Purchase Flow

// 1. Approve USDC premium
await usdc.approve(standingBidContract, premiumAmount);

// 2. Purchase option
const tx = await standingBidContract.purchaseOption({
  assetId: "hedge fund xyz",
  coverageAmount: 50000000, // $50M
  durationDays: 30,
  premiumAmount: 1750000 // $1.75M
});

// 3. Receive option NFT
const optionId = tx.events.OptionPurchased.optionId;

Execution Flow

// 1. Check current settlement value from oracle
const settlement = await discountOracle.getSettlementValue(
  assetId,
  coverageAmount
);

// 2. Execute option
const tx = await standingBidContract.executeOption(optionId);

// 3. Receive settlement USDC + premium returned
// Minus origination fee

Oracle Price Feed

Options always execute at the current oracle price:

// Get current pricing
const pricing = await discountOracle.getCurrentPricing(assetId);

// pricing = {
//   nav: 150000000,
//   staticDiscount: 0.05,
//   dynamicDiscount: 0.12,
//   totalDiscount: 0.17,
//   settlementValue: 124500000,
//   lastUpdate: 1635724800
// }

FAQ

Q: What happens if RAVA can't honor the execution?

A: Standing bid options are over collateralized. RAVA deposits the full coverage amount in USDC to the smart contract at option purchase. Execution is guaranteed programmatically.

Q: Can I sell my option to someone else?

A: Yes, options are ERC 721 NFTs. You can transfer or sell them. The new holder can execute the option.

Q: What if the fund's NAV drops significantly?

A: You receive settlement value based on the lower NAV. The discount applies to whatever the current NAV is: V_settlement = NAV(t) × (1 discount).

Q: Can I extend my option before expiration?

A: Not currently. You would need to let the current option expire and purchase a new one. We may add extension functionality in the future.

Q: How often does the oracle update?

A: Dynamic factors update every 5 seconds based on liquid market data. NAV updates when the fund reports new NAV (typically quarterly or monthly).

Q: What if my asset isn't in the oracle yet?

A: Contact us to onboard your asset. We can typically add new funds within 48 hours if we can verify NAV and classify structural factors.

Q: Can I purchase multiple options on the same asset?

A: Yes, you can stack multiple options for greater coverage or different durations.

Q: What's the maximum coverage I can purchase?

A: Coverage is limited to the asset's current NAV less the discount. We may also impose per asset limits based on our USDC reserves.

Next Steps

Ready to secure guaranteed liquidity for your protocol?

View the Model Price Oracle See real time pricing for your assets
Purchase an Option Get guaranteed liquidity coverage
View Hedge Markets Explore hedging strategies for dynamic factors
Read the Technical Docs Understand the oracle pricing model

For protocol integrations or large coverage amounts, contact us at general@rava.money

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