Rollover Fee

Captures the externality of asset volatility. Compounded per block, this fee is applied synthetically to a trader’s entire position size on non-crypto pairs and then deducted from position PnL. A Gelato automation keeps track of the Average True Range Volatility values on a per-asset basis and programmatically updates daily with volatility data inputs from Ostium’s oracle.

The volatility fee prices the risk of a greater probability of large swings in directional exposure resulting from periods of high volatility or sustained greater volatility on certain pairs.

This hyperbolic volatility fee formula is as follows:

$$f_{\mathrm{vol}} \;=\; R_{\mathrm{vol}} \Biggl( \frac{k_{\mathrm{vol}}\,V\,(k_{\mathrm{vol}} - 1)} {k_{\mathrm{vol}}\,V - v} \;-\;k_{\mathrm{vol}}+1 \Biggr)$$

• V: The maximum allowable volatility in the protocol. Once this threshold is reached, all trading on the corresponding pair must be halted to ensure market stability.

• R_vol: The maximum rollover fee, expressed as a percentage per hour, day, or any other time unit. This fee applies to unrealized PnL when volatility is at its maximum level, ensuring that participants pay the highest rollover costs under extreme conditions.

• k_vol: The slope parameter controls the behavior of the volatility function.