I am curious to understand how pool NAV value translates to DROP & TIN pricing

Product Tinlake/ Centrifuge app
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I am keen to understand the following processes.

  1. How pool NAV value translates to DROP & TIN pricing?
  2. As the majority of pools are revolving, is there any fixed time frame for the pool to operate? because as mentioned in documents, TIN investors will get their returns once all DROP investors are paid fully. So when does a time comes in a revolving pool when all DROP holders are paid and TIN holders get their share?
    Thanks,
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Hi chint. The Net asset value reflects the present value of the outstanding portfolio of financings including the liquidity of the pool. It is the sum of the present values of the risk-adjusted expected repayments of all outstanding financings.
The time frame you are asking for is the maturity and it depends on the asset class. A in depth description how TIN and DROP-tokens are designed can be found in the user docs:

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Hello @Tjure07, Thank you for the response.

The link you mentioned does not talk about calculating DROP & TIN prices from the pool NAV.
Could you please provide more information on that?

Thanks!

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Hey @chint,

Here’s an explanation. Likely to be a bit simplified and some big decimal’d numbers are rounded. We have more detailed smart contract docs coming out this week for Tinlake in our documentation which explains all this (and more…much more!).

How token prices are calculated:
dropPrice = seniorAsset / seniorSupply
tinPrice = juniorAsset / juniorSupply

For DROP: seniorAsset is the share of the pool in the senior tranche, and seniorSupply is the total amount of DROP ERC20 tokens.

Similar for TIN with juniorAsset and juniorSupply — juniorAsset being the share of the pool in the junior tranche, juniorSupply being the total amount of TIN ERC20 tokens.

Using the Flowcarbon Nature Offsets Series 1 pool aka FNO1 as an example:

Senior tranche value (seniorAsset) = 455,634 DAI
Supply of FNO1DROP (seniorSupply) = 434,412.8913
455634 / 434412.8913 = 1.04885

And for TIN:
Junior tranche value (juniorAsset) = 518,368 DAI
Supply of FNO1TIN (juniorSupply)= 325,547.1344.
518,368 / 325,547.1344 = 1.5923

And as you can see, these DROP/TIN prices match up with the DROP/TIN price displayed on the pool page’s UI. Hope that helps!

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Hey @chint ,

Tinlake pools are revolving or open-ended. Maturities of the underlying assets give you an indication of liquidity (how often are assets repaid and borrow…) and the maturity of the longest outstanding asset could be interpreted as the minimum current tenor of the pool. The smart contracts settle the value distribution between DROP and TIN holders at every epoch ensuring investors enter/exit the pool at the current valuation.

@devin shared a great example already. Conceptually, DROP token accrue value at the fixed DROP rate (adjusted by cash drag - so idle funds also don’t earn return for DROP). TIN takes the residual of the value accrued beyond the DROP rate. This varies depending on the income/value accrued of the pool (ultimately determined by the average financing fee).

Hope this helps.

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Hey, @devin Thanks for the explanation.

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Hey @denniswell

Thank you for the response.

A follow up question please.

Can TIN holders square off their position after an epoch, before the maturity of the last outstanding asset? If not, and if pool keeps rolling, is there any time frame for TIN holders after which they can sell the TINs?

Thanks!

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Investment and redemptions are only happen at the end/execution of an epoch based on all locked orders and the pool metrics (e.g. available liquidity in the reserve, min TIN ratio). No investor can exit or enter a pool in between epochs. TIN holders can redeem as long there is liquidity in the reserve, no DROP redemptions (who have seniority/priority) are locked and pool risk metrics remain in place. So this means e.g. final TIN holders can only redeem after the final DROP holders have redeemed as the minTIN ratio needs to remain intact

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