Yield Generation

A quick guide into yield-generation strategies in Falcon Finance: funding rate & cross-exchange arbitrage, staking & liquidity pools.

Unlike other synthetic dollar protocols that rely solely on positive funding rate arbitrage, yield distributed to USDf stakers is derived from multiple different sources. This approach ensures consistent yields regardless of market conditions.

Strategy	Description
Positive Funding Rate Arbitrage	Falcon generates yield on positive funding rates by maintaining spot positions while shorting corresponding perpetual futures. The spot assets are concurrently staked, generating additional yield alongside funding rate income.
Negative Funding Rate Arbitrage	Conversely, Falcon can sell spot holdings and long futures to generate a yield with negative funding rates.
Cross-exchange Price Arbitrage	Falcon buys and sells assets across multiple markets to profit from differences in their prices.
Native Altcoin Staking	Falcon leverages native staking opportunities for supported non-stablecoin assets, allowing the protocol to earn higher on-chain yields as part of its diversified yield strategy.
Liquidity Pools	Falcon deploys a portion of assets into tier-1 on-chain liquidity pools to generate yield through on-chain dex activity and arbitrage.
Options-Based Strategies	Falcon utilizes options-based strategies to capture volatility premiums and pricing inefficiencies. By employing ai models, hedged options positions and spreads, the protocol aims to generate yield while maintaining controlled directional exposure and defined risk parameters.
Spot/ Perps Arbitrage	Falcon executes market-neutral arbitrage by holding spot assets while taking offsetting perpetual futures positions. This allows the protocol to capture price basis movements and funding rate opportunities between spot and derivatives markets while maintaining hedged exposure.
Statistical Arbitrage	Falcon employs quantitative, mean-reversion and correlation-based trading models to identify and capture short-term pricing inefficiencies across assets and markets. These strategies are market-neutral in design and are executed with strict risk controls to minimize directional exposure.
Extreme Movements Trading	Falcon selectively executes strategies designed to capitalize on short-term dislocations during periods of extreme market volatility. These trades are deployed opportunistically with strict risk controls, allowing the protocol to generate yield when markets experience sharp, temporary movements.