Hedge your Portfolio

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In Horizon Protocol, your Debt Balance fluctuates as a percentage of the Global Debt Pool. To properly hedge the Global Debt Pool, it is recommended to hold zAssets that mirror its composition.

What is Debt Hedging

Debt hedging involves reducing the risk of price movements in your asset. In the scenario of your Horizon Protocol portfolio, because the value of the Global Debt Pool fluctuates due to the movement in asset prices, it can affect your debt.

If the zAssets in the Global Debt Pool goes up relative to your zAssets (i.e. Global Debt Pool has 30% zBNB, 70% zUSD, and the price of zBNB has gone up, while you hold 100% zUSD), then your Debt Balance will increase, meaning that you will need extra zUSD to fill that difference.

Alternatively, if the zAssets in the Global Debt Pool goes down relative to your zAssets (i.e. Global Debt Pool has 30% zBNB, 70% zUSD, and the price of zBNB has gone down, while you hold 100% zUSD), then your Debt Balance will decrease, meaning that you will have extra zUSD, more than the balance needed to pay back your debt.

To offset this risk, the best way is to mimic the zAssets in the Global Debt Portfolio so that the price movement between the Global Debt Pool and your zAssets remain largely the same.

How to Hedge your Debt in Horizon Protocol

Tools are currently being developed to assist in hedging your debt on Horizon Protocol, including a feature showing a "Suggested Sample Hedge", which will provide recommendations on how to allocate your zAssets to closely mimic the Global Debt.