Protection pricing
How Cork calculates the annualized cost of standard 30-day protection.
Protection pricing uses a 30-day loss calculation and the stated product terms. It shares the vault structure and recovery evidence used by the annual assessment.
Standard termsLink to this section: Standard terms
| Term | Setting |
|---|---|
| Mode | Liquidity impairment |
| Duration | 30 days |
| Exercise fee | 2.5% |
| Repurchase fee | 0.3% |
The selected protection collateral depends on the vault denomination. Its yield, the reference rate, and the required return for protection capital enter the price.
What drives the priceLink to this section: What drives the price
The engine prices the chance and depth of loss during the protection term. Collateral recovery sets the depth of that loss.
- Expected loss over the term The chance and depth of loss during the protection term. raises the price
- Severe outcomes The size of the worst outcomes within the term. raises the price
- Yield and reference rate The protection collateral's yield and the reference rate. lowers the price
- Exercise and repurchase terms The fees that change what the protection seller pays and receives. adjusts the price
- Minimum premium The lower bound set by the pricing policy. sets the lowest price
The exercise fee reduces the amount paid by the protection seller after an exercise. A higher fee can therefore reduce the premium.
Reading protection APYLink to this section: Reading protection APY
The dashboard shows protection cost as annual percentage yield (APY). This makes quotes with the same terms easier to compare. The amount paid for 30 days is the term cost shown beside the annualized rate.
Comparing protection APY with vault yield is a useful commercial check. A high protection cost should lead the reader back to the recovery, asset, and loss inputs that drive it.
Continue with the Glossary.