Payout

#The formula

When a pool triggers, it pays each buyer

• Average depeg is the time-weighted average of the depeg over the streak, measured at the conservative edge d_hi.
• X is the pool’s trigger level; only the depeg beyond it is paid.
• Cap bounds the payout. In production pools it is 20% of notional.

For example, with X = 2%, a streak whose average depeg is 5% pays 3% of notional. A streak averaging 30% pays the 20% cap.

#Why a time-weighted average

The average is the area under the depeg over the streak, divided by its length. Each pair of consecutive failing observations adds a trapezoid. Posting more observations of the same depeg does not change the result, so the side that posts more often cannot tilt the average.

#Fixed at the trigger

The payout fraction is recorded the moment the streak reaches T, and claims open at once. The pool reserves enough USDC for every claim at that fraction. A depeg that deepens after the trigger does not raise the payout.

#Underwriters after a trigger

Each underwriter withdraws their share of what is left:

If the pool never triggers, reserved is zero and underwriters get their capital back plus all premiums.