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Liquidation

Protector

to protect liquidation risk �using Knock-In Option

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Background

Using KI(Knock-In) option as the “Liquidation Protector”, we design a market where investors can hedge the risks of various liquidation events.

Product Summary

The KI Option (so called Liquidation Protector) is a barrier option depending on whether the underlying asset price hits the barrier price or not.

There are two KI Option tokens: ‘Short KI Option’ token (-, sell position) & ‘Long KI Option’ token (+, buy position) of KI Option.
The Short Option holder expects that the event will not be triggered. The Short Option holder can claim the deposited payoff(1 ETH) if the event is not triggered by the time of its maturity.
The Long Option holder receives a payoff(1 ETH) when the mark price of a specific underlying asset(ETH price) hits the barrier price. If Long Option Holder has position on Lending Protocol, the payoff will be automatically added to collateral to protect liquidation.

Mechanism – Option Issuance

‘Option Issuer’ issues ‘Long KI Option’ token & ‘Short KI Option’ tokens at once. �Payoff must be deposited to issue the options.

Mechanism – Option Trade

By trading Long Option tokens, the issuer can be short option holder only. �Short option holder takes open position and option premium when trade is settled.

Mechanism – Option Termination

At the maturity without hitting barrier price, the option is terminated.�And the deposited payoff is claimable for the Short Option holder.

/ If the event is not triggered by the maturity

Mechanism – Option Settlement

The option event is triggered if the mark price of underlying asset crosses the barrier price before maturity. And the deposited payoff is paid to the Long Option holder.
If Long Option Holder has position on Lending Protocol, the payoff will be automatically added to collateral to protect liquidation.

/ If the event is triggered