Rehypothecation

The Rehypothecation Module controls how FW tokens balance between idle reserves and yield-generating vault deployments.

Overview

FW tokens hold their underlying assets in two places: idle reserves (for instant redemptions) and an ERC-4626 vault (for yield generation). The RehypothecationModule defines the parameters that govern this balance.

Rehypothecation ensures FW always has enough idle liquidity for redemptions while maximizing yield by deploying the rest into the underlying vault.

How it works

The RehypothecationModule defines three parameters (in basis points):

Parameter	Purpose
phiMin	Minimum idle ratio — if idle drops below this, assets are withdrawn from vault
phiMax	Maximum idle ratio — if idle exceeds this, excess is deposited into vault
phiTarget	Target idle ratio — used by forceRehypothecation() to rebalance

Triggering rebalance

• triggerRehypothecation() — Callable by anyone. Deposits excess to vault if idleRatio > phiMax, or withdraws from vault if idleRatio < phiMin. No-ops if the ratio is within bounds.
• forceRehypothecation() — Owner-only. Always rebalances to phiTarget regardless of current ratio.

Example

If phiMin = 10%, phiMax = 30%, phiTarget = 20%:

• FW holds 100 USDC total, 5 USDC idle (5% idle ratio → below phiMin)
• Anyone calls triggerRehypothecation() → vault withdraws USDC to bring idle up
• After rebalance: ~20 USDC idle, ~80 USDC in vault

Key features

• Automatic yield optimization — Excess idle funds are deployed for yield
• Redemption guarantees — Minimum idle ratio ensures users can always redeem
• Permissionless triggers — Anyone can call triggerRehypothecation() when out of bounds
• Owner-controlled force rebalance — Protocol can rebalance to target at any time

Related contracts

• RehypothecationModule.sol — Contract details
• FWBase.sol — FW base contract that uses the module