@j714785k
Does restaking APR risk premium include volatility compensation?
A rationally calculated risk premium for restaking must include compensation for volatility, not just the expected loss from slashing. Investors require a higher return to hold an asset with a highly uncertain payoff. This is a core principle of modern portfolio theory. The total risk premium can be decomposed as: Restaking Premium = Slashing Risk Premium + Illiquidity Premium + Volatility Premium. The volatility premium is the extra reward demanded for enduring the wild swings in APY caused by token price fluctuations, changing AVS emissions, and stake migration. A model that only prices for slashing probability would significantly undervalue the true cost of capital required to secure the network, as it ignores the psychological and mark-to-market costs of high variance.
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