Core Concepts

Understanding these concepts is essential for interpreting FYOS metrics correctly.

The Funding Mirage Problem

Most platforms display headline funding APR — the annualized rate if current funding persisted indefinitely. This is misleading because:

1. Funding rates are mean-reverting
2. High funding attracts capital, which compresses rates
3. Market conditions change faster than holding periods

FYOS quantifies this gap between apparent yield and achievable yield.

Survivable Yield

Survivable yield is the portion of funding APR expected to persist through a realistic holding period, accounting for:

• Half-life decay — Exponential reversion to mean
• Sign-flip risk — Probability of funding switching direction
• Capacity pressure — Crowding effects from position sizing

Mirage Ratio

The mirage ratio quantifies unrealizable yield:

Half-Life

Half-life measures how long until funding rate decays to 50% of current value:

Where $\lambda$ is the exponential decay coefficient estimated from historical funding data.

Capacity

Capacity measures how much capital an opportunity can absorb before degrading:

• Soft Capacity — Position size where returns begin degrading
• Hard Capacity — Maximum reasonable position size

Exceeding capacity triggers a capacity penalty that reduces expected returns.

Edge Value Score

The Edge Value Score (0-100) combines:

• Survivable APR magnitude
• Half-life persistence
• Capacity headroom
• Trust layer reliability

Higher scores indicate better risk-adjusted opportunities.

Trust Layer

The Trust Layer evaluates prediction accuracy by comparing:

• Historical predictions vs. realized outcomes
• Systematic prediction errors
• Reliability grades per opportunity

This creates accountability for FYOS metrics.

Next Steps

• Methodology — Full mathematical specification
• Metrics Reference — Complete dictionary of all metrics