Worked example: aHYPER

This page walks through the mechanics of a Covenant Market end-to-end using the live aHYPER market as the example. It connects the abstract material in How tranching works, The Latent Swap AMM, and Perpetual Debt to a concrete deployment.

For a tight market reference (parameters, tickers, links), see the aHYPER market page.

The Base Asset

aHYPER is the share token of the Hyperithm Delta Neutral Vault on Accountable, a permissionless USDC vault managed by Hyperithm. The vault pools USDC and runs a delta-neutral book (basis trading on Hyperliquid, regulated securities, on-chain venues), with all holdings cryptographically verified by Accountable's Data Verification Network. Net yield to vault depositors is approximately 10% per year:

• ~8% from the underlying delta-neutral strategy (after Hyperithm's 2% performance fee);

• ~1% from Accountable points (ACC) at the assumed $100M FDV;

• ~1% from Merkl WMON distributions while the program is active.

The Covenant aHYPER Market accepts deposits of aHYPER (not raw USDC) and tranches the deposited share token.

The split

A Liquidity Provider deposits $100 of aHYPER into the Covenant aHYPER Market. At the market's 80% target LTV, the value of the collateral pool splits cleanly between the two tranches:

$V_B = V_Y + V_L \quad\Rightarrow\quad \$100 = \$80 + \$20$

where $V_B$ is the Base Asset NAV, $V_Y$ is the Yield Coin NAV (notional), and $V_L$ is the Leverage Coin NAV.

Tranche	NAV (notional)	Effective leverage
Yield Coin (USD.b.aHYPER)	$80	1x
Leverage Coin (aHYPERx5.USD)	$20	5x

The 80% target LTV gives the Leverage Coin a 5x effective leverage on aHYPER (1 / (1 - 0.8) = 5). The Latent Swap AMM clears the Yield Coin at a target ~4% APY at this LTV; the actual rate at any moment is whatever the live AMM price implies. As the market moves away from target LTV, the AMM moves Yield Coin and Leverage Coin prices off NAV.

Where the yield goes

All of the underlying aHYPER yield (~10% net, including Accountable points and Merkl distributions) accrues to the Leverage Coin tranche through the share-price growth of the collateral pool. The Yield Coin earns funding paid by the Leverage Coin, accruing through dilution at the rate set by the Latent Swap.

At the target design point (80% LTV, 4% Yield Coin APY), one year of holding looks like this:

• aHYPER collateral pool grows from $100 to ~$110 (10% net yield).

• Yield Coin notional accretes from $80 to ~$83.20 (4% on $80 = ~$3.20 of funding paid by Leverage Coin to Yield Coin).

• Leverage Coin claim = collateral - Yield Coin notional = $110 - $83.20 = ~$26.80.

• Yield Coin holder return: ~4% APY (soft-locked at entry by buying the Yield Coin at the corresponding Latent Swap price).

• Leverage Coin holder return: ~$6.80 on $20 deposit = ~34% APY.

The Leverage Coin captures roughly the underlying yield times effective leverage, less funding paid to the senior:

$\text{Leverage Coin APY} \approx (y \times \text{leverage}) - (r \times \text{LTV} / (1 - \text{LTV})) = (10\% \times 5) - (4\% \times 4) = 34\%$

Drawdown scenario

Suppose the aHYPER NAV falls 5% over the year (the Hyperithm strategy underperformed expectations) instead of growing:

• aHYPER collateral pool moves from $100 to $95.

• Yield Coin notional still accretes from $80 to ~$83.20 at the prevailing spot rate. Senior accrual is unaffected by aHYPER performance until the Leverage Coin buffer is exhausted.

• Leverage Coin claim = $95 - $83.20 = ~$11.80.

• Yield Coin holder return: ~4% APY (unchanged; the collateral pool still covers the senior notional).

• Leverage Coin holder return: ~-41% on the $20 deposit (the full $5 NAV drop plus the $3.20 of funding paid to senior).

The Leverage Coin absorbs the loss first; the Yield Coin is unaffected as long as aHYPER NAV stays above the Yield Coin notional.

Stress: LTV gates

If leverage demand pushes the market into stressed LTV, the protocol enforces gates:

• HighLTV (92%): no further Leverage Coin → Base swaps and no further Base → Yield Coin mints. Both directions would deepen the imbalance.

• MaxLTV (96%): only Yield Coin → Base redemptions remain open.

These gates allow the market to rebalance through new Leverage Coin deposits or matched pair-redeems before the senior buffer is exhausted. No individual position is force-closed at any point.

How to enter and exit

• Deposit: swap the Base Asset (aHYPER) directly into either tranche on the Latent Swap AMM, or pair-mint matched Yield Coin and Leverage Coin notional against fresh aHYPER collateral with no slippage.

• Exit: swap the tranche back to aHYPER on the Latent Swap (slippage scales with trade size), or pair-redeem matched notional against the collateral pool with no slippage. aHYPER itself is then redeemable through Accountable's normal redemption windows.

Live rates, capacity, and the deposit/redeem flow are on the Covenant app. Market parameters and tickers are on the aHYPER market page.