Overview
In alignment with our Principal Token Risk Oracle framework—outlined in detail here—we present our risk parameter recommendations for the proposed maturity and underlying asset listing: PT-eUSDE-29MAY2025. Leveraging the dynamic linear discount rate oracle implementation, we also provide our recommended values for initialDiscountRatePerYear and maxDiscountRatePerYear, derived from the extended methodology detailed here.
Risk Oracle Parameter Evolution
Through our rigorous quantification of the algorithm, we find that the integration risk decays as the PT approaches maturity. This dynamic justifies the use of progressively more conservative risk parameters over time. Taking into account the underlying proposed configuration of USDe E-mode within Aave, we outline the projected evolution of the LT, LTV and LB, with the initial parameterization approximately as follows:
LTV: 91%
LT: 93%
LB: 3.3%
Note that this parameterization explicitly refers to E-mode such that the PT can only borrow correlated assets, while effectively disallowing uncorrelated debt assets to be borrowed. The LTV and LT will remain constant throughout given the relatively short time until maturity, as is capped by the underlying, with the LB continuing to decay over time until maturity.
The yield trading component of the PT stems from Ethereal’s Season Zero Points, as well as 30x Ethena points. The underlying asset for PT-eUSDe is simply USDe, thus the aggregate oracle configuration does not include the exchange rate of sUSDe/USDe and simply references the PT linear discount rate oracle implementation alongside the USDT/USD pricing of USDe. As such, the underlying configuration will be derived in accordance with a minimum liquidation bonus of 2% and maximum liquidation threshold of 93% for the underlying, per our recommended parameterization for a USDe stablecoins E-mode here.
Initial Discount Rate Per Year and Maximum Discount Rate Per Year
Based on historical observed data and the pricing configuration of the market, our initial recommendations for the discountRatePerYear and maxDiscountRatePerYear are as follows:
Initial discountRatePerYear: 7.87%
maxDiscountRatePerYear: 39.22%
If pricing dynamics change until its listing, such that discountRatePerYear will require a refresh, we will institute such a change accordingly upon listing.
On-chain Liquidity and Initial Cap
With the relevant debt assets necessitating the leveraging of on-chain liquidity for both the underlying asset and Pendle AMM liquidity, PT-eUSDE-29MAY2025 employs significant on-chain liquidity. The plot below represents the amount of liquidity available under 3% slippage as the market approaches expiry, given the current liquidity distribution in the AMM. As the market matures and moves closer to expiry, the slippage associated with swapping PT becomes less extreme. This trend is especially pronounced for assets with lower scalarRoot values, i.e. a greater expected implied yield fluctuation, and they tend to have more variance in liquidity concentration. Supported by deep on-chain liquidity in the Pendle AMM, at the current time to maturity, the market currently facilitates swaps of up to $175M with less than 3% slippage.
Specification
| Parameter | Value |
|---|---|
| Asset | PT-eUSDe |
| Isolation Mode | No |
| Borrowable | No |
| Collateral Enabled | Yes |
| Supply Cap | 150,000,000 |
| Borrow Cap | - |
| Debt Ceiling | - |
| LTV | 0.05% |
| LT | 0.1% |
| Liquidation Penalty | 7.50% |
| Liquidation Protocol Fee | 10.00% |
| E-Mode Category | PT-eUSDe Stablecoins |
PT-eUSDe Stablecoins E-mode
| Asset | PT-eUSDe | USDC | USDT | USDS |
|---|---|---|---|---|
| Collateral | Yes | No | No | No |
| Borrowable | No | Yes | Yes | Yes |
| LTV | Subject to Risk Oracle | - | - | - |
| LT | Subject to Risk Oracle | - | - | - |
| Liquidation Bonus | Subject to Risk Oracle | - | - | - |
Initial E-mode Risk Oracle
| Parameter | Value |
|---|---|
| LTV | 91% |
| LT | 93% |
| LB | 3.3% |
Linear Discount Rate Oracle
| Parameter | Value |
|---|---|
| discountRatePerYear (Initial) | |
| 7.87% | |
| maxDiscountRatePerYear | 39.22% |
Disclaimer
Chaos Labs has not been compensated by any third party for publishing this recommendation.
Copyright
Copyright and related rights waived via CC0