AI Strategy Parameters & Tuning

1. Strategy Template: HFRR-CLMM

Name & Type

HFRR-CLMM: High-Frequency Range Rebalancing for Concentrated Liquidity Market Making. It's a dynamic strategy tailored for modern CLMM (Concentrated Liquidity Market Maker) AMMs like Cetus and Uniswap V3, which focuses on ultra-narrow price bands with frequent rebalancing to maximize fee capture while mitigating impermanent loss.

Target Pairs

Initially deployed on the SUI/USDC trading pair. Future deployments may include high-volume, high-volatility pairs (e.g., DEEP/SUI, CETUS/USDC).

AMM Integration (e.g., Cetus on Sui)

Deployed on Cetus AMM, a Uniswap V3-style CLMM built for the Sui blockchain. Integrates with Cetus SDK for price feeds, tick data, liquidity depth, and gas cost estimation. Smart contracts interact directly with pool objects to add/remove liquidity within selected ticks.

2. Key Parameters

ΔP_range (Price Range Width)

This defines the tightness of the liquidity band relative to the current price P_c. Narrower bands = higher fee capture, higher rebalance frequency, higher gas costs.

• Example: ΔP_range = ±0.10% → liquidity placed within 0.1% of P_c.

δ_trigger (Rebalance Threshold)

The % deviation of the current price from the range boundary that triggers a rebalance. It can be defined in % or tick units.

• Example: If P_c crosses P_min or P_max by 0.02%, and δ_trigger = 0.01% → rebalance is initiated.

T_hold_min (Minimum Hold Time)

Minimum time (in seconds/minutes) before a position can be rebalanced again. It prevents over-trading and protects against excessive gas usage, which ensures the strategy commits capital for a minimum interval to collect fees.

σ_threshold (Volatility Cutoff)

It determines if market volatility is too high for narrow-band liquidity provision. If realized or implied volatility exceeds σ_threshold, the strategy may pause or widen bands based on the rolling standard deviation of price (σ_market).

C_gas_profit_ratio (Gas-Profit Threshold)

Strategy only rebalances if the expected fee gain exceeds gas cost by a set ratio. Helps maintain profitability in volatile or expensive gas conditions.

• Formula:

Expected Fee / Estimated Gas Cost > C_gas_profit_ratio

Event Window Logic

Defines time windows to pause trading around economic events (e.g., CPI reports, FOMC). Window = pre-event buffer + post-event cooldown. It helps prevent execution during unstable liquidity or low predictability.

3. Parameter Optimization (Backtest Results)

Summary of How Parameters Are Tuned

Parameters are optimized using historical tick-level data from Cetus for 5+ months. Simulations assess performance across multiple volatility regimes and fee environments. Objectives include maximizing net APY, reducing IL, and minimizing gas cost per rebalance.

Default vs Optimized Values

Parameter	Default	Optimized Range (example)
ΔP_range	±0.15%	±0.05% – ±0.25%
δ_trigger	0.01%	0.005% – 0.015%
T_hold_min	15 min	5 – 30 min
σ_threshold	2.5%	1.5% – 3.0%
C_gas_profit_ratio	1.5	1.2 – 2.0

🚧 Placeholder: Final tuning values pending backtest report from VAR Meta team.

Strategy Switching Logic (Agentic vs Manual)

• Agentic: AI agent monitors volatility, volume, fee yield, and pool depth to autonomously switch parameters or strategies.

• Manual: DevOps or strategy team may override via governance hooks or emergency admin tools.

The long-term goal is full autonomy with periodic human oversight for safety checks.