Protection model

How 20% minimum protection is enforced

To protect Senior capital, the smart contract enforces a minimum 20% Junior supply floor, guaranteeing a permanent 20% first-loss cushion. Above this minimum floor, a Premium Rate Model (PRM) dynamically manages a target Junior buffer. This ensures that even during periods of high withdrawal demand, there is always sufficient liquidity for Junior depositors to exit safely.

Loss split at different drawdowns

When the pool is split 20% Junior and 80% Senior, losses will be distributed as follows:

When the pool is split 30% Junior and 70% Senior, senior absorbs less on the same drawdown - junior's deeper buffer pushes the breakpoint out from 20% to 30%:

A few notes on how to read these:

• Below junior's depth, senior is untouched. Junior alone absorbs the loss and its share price drops proportionally to how much of junior's depth the loss consumes.
• At junior's depth exactly, junior is wiped to zero. Senior is still whole - the loss precisely matches what junior was sized to absorb (20% in the first table, 30% in the second).
• Above junior's depth, the residual hits senior. Senior's share price drops by residual ÷ senior%. Only at a 100% drawdown of the underlying is senior also wiped.