Index Construction Risk

This section addresses the methodological risks inherent in the design and maintenance of OLTA’s structured index products.

Nature of the Risk

Even with rule-based logic, index construction can introduce structural biases or tracking errors that impact index quality, investability, and representativeness.

Key risks include:

• Overconcentration: Excessive exposure to one or two assets, especially in market-cap weighted indices

• Survivorship Bias: Inclusion of only successful or currently active tokens, ignoring those delisted or failed

• Inconsistent Eligibility Application: Misalignment between index rules and actual token behavior or data availability

• Weight Drift: Uncontrolled deviation from target allocations between rebalancing windows

• Data Gaps: Incomplete or inaccurate data inputs (e.g., oracle errors, missing volume/liquidity data)

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Mitigation Measures

OLTA minimizes index construction risk through:

1. Transparent Rulebooks

Each index is governed by a formal prospectus outlining eligibility, weighting, and rebalancing logic.

2. Asset Caps & Filters

Sector caps, free-float adjustments, and liquidity screens help control overweighting and ensure diversity.

3. Regular Rebalancing & Annual Reconstitution

Index weights are updated quarterly, with full eligibility reassessed annually.

4. On-Chain Data Audits

All constituent data (price, volume, supply) is sourced via oracles or verifiable APIs and cross-checked for consistency.

5. Methodology Governance

Any change to index construction methodology must be proposed and approved via governance.

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This ensures OLTA indices maintain methodological integrity, reflect their intended exposure, and avoid structural drift over time.