Risk Analytics

This section introduces additional financial and statistical metrics used by OLTA to provide a comprehensive view of each index’s risk-return profile.

Purpose

While Value at Risk (VaR) captures potential downside loss, a broader set of analytics is required to understand the full risk landscape of an index. OLTA uses the following complementary indicators to enrich institutional analysis and improve fund transparency.

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Key Metrics

1. Conditional Value at Risk (CVaR)

Also known as Expected Shortfall, CVaR estimates the average loss in the worst-case scenarios beyond the VaR threshold.

$${CVaR} = \mathbb{E}[L \mid L > \text{VaR}]$$

Where:

• L = portfolio loss

• VaR = Value at Risk at a chosen confidence level (e.g., 95%)

• 𝔼 = expected value operator, representing the average outcome under the given condition

2. Maximum Drawdown

The largest observed loss from a peak to a trough before a new peak is attained.

$${Max Drawdown} = \frac{\text{Peak} - \text{Trough}}{\text{Peak}}$$

3. Sharpe Ratio

Measures return per unit of total volatility.

$${Sharpe Ratio} = \frac{R_p - R_f}{\sigma_p}$$

Where:

• Rp = portfolio return

• Rf = risk-free rate

• σp = standard deviation of portfolio returns

4. Sortino Ratio

Like the Sharpe Ratio but penalizes only downside volatility.

$${Sortino Ratio} = \frac{R_p - R_f}{\sigma_d}$$

Where:

• σd = standard deviation of downside deviation only

5. Beta (vs BTC + ETH or benchmark)

Measures index sensitivity to the overall market (or BTC + ETH).

$$beta = \frac{\text{Cov}(R_p, R_m)}{\text{Var}(R_m)}$$

Where:

• Rp = portfolio return

• Rm = market (or BTC + ETH) return

6. Turnover Ratio

Measures the percentage of the index that changes at each rebalancing.

$${Turnover} = \frac{1}{2} \sum \left| \text{New Weight} - \text{Old Weight} \right|$$

7. Liquidity-at-Risk (LaR)

Estimates the portion of the index that can be liquidated without exceeding a defined slippage threshold.

Concept: Evaluate order book depth (or AMM pool curve) required to sell a given notional (e.g., $100k) with ≤ 1% price impact.

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Implementation

• Displayed in index factsheets and dashboards

• Recalculated monthly by default (or more frequently for high volatility funds) for high-volume funds

• Used to monitor index health, compliance, and historical risk-adjusted performance

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OLTA’s Risk Analytics suite offers investors and stakeholders a complete toolbox for evaluating structured crypto exposure with the same rigor found in traditional finance.