Underlying Value

How to value the underlying assets in a deal

Using the paired currency of the underlying assets as stated in the previous chapter, we built an engine to allow us to get the value of any token holdings in their DEX pair. This is called the underlying value in our protocol.

This enables our protocol to put value on:

• Collateral

• Cost / Premium

• Payoff and Fees

This also enables the protocol to have support for:

• Custom LTV calculations

• Max loss calculations

• Custom Liquidation models

Max Loss Calculations

Collateral value is fed into the settlement function to determine the maximum loss a buyer or writer can incur in a deal, based on the market value at time of settlement.

Options - max loss is cost to buyer. To writer its capped by maximum collateral value, based on current DEX market value during settlement.

Swaps - max loss is based on the maximum value of the collateral provided, based on current DEX market value during settlement.

Custom LTV Calculations

Our OTC lending platform allows parties to set or agree on custom LTVs when issuing loans.

Collateral value is fed into the Loan writing or taking functions, enabling parties to gauge the distance or gap in value between the loan and the collateral tokens provided.

Custom Liquidation Models

Hedges and loans on our protocol are settled only after expiry. Deals cannot be settled before the expiry date is passed. The live DEX market prices of the underlying ERC20 assets in the hedge or loan determines the liquidation zones for the miners or validators.

When a deal approaches liquidation levels i.e. the point of minimum value required to be maintained by the loan collateral: the miner can see the deals on his timeline and can execute any deals which just went past the liquidation price or value.