jseam
jseam
MORPHO+1.53%
The risk curve model is only valid if you have a normal distribution, the efficient frontier graph is a consequence of the modern portfolio theory framework MPT is as good as astrology at approximating the optimal portfolio Most distribution in finance follow power laws with an undefined variance A small number of assets account for the returns, many other assets will go to ~zero but you don’t know which Using a normal distribution to model this is a bad idea as 3-6 sigma events may happen at higher probabilities than what a normal distribution would predict DeFi protocols or fund managers that underprice this risk will eventually implode
Omer Goldberg
Omer Goldberg
1/ Every architecture involves tradeoffs. Good design allows you to design a system where, for every unit of risk you take, you earn the most reward, and for every unit of reward you take, you incur the least risk. From a liquidity risk PoV, Morpho's model is suboptimal.
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