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Financial Model

PRISM's financial model is based on tranche assets, tranche supply, NAV, yield allocation, and loss allocation.

Net Asset Value​

Each tranche maintains NAV:

NAV = total_assets / total_supply

NAV determines:

  • Minting rate during deposit.
  • Redemption value during withdrawal.
  • Intrinsic tranche value after yield accrual.
  • Intrinsic tranche value after credit losses.

If a tranche has 10,000 USDC of assets and 10,000 tranche tokens outstanding, NAV is 1.00 USDC per token. If yield increases assets to 10,041.10 USDC while supply is unchanged, NAV rises to 1.00411.

Yield Mechanics​

Yield is introduced through authorized accounts and allocated by the waterfall.

Example yield order:

  1. Prime receives yield up to its target.
  2. Core receives yield up to its target.
  3. Alpha receives residual yield.

This lets PRISM express different risk-return profiles inside the same vault.

Loss Mechanics​

Losses are applied directly to tranche assets and reflected in NAV.

Loss order:

  1. Alpha.
  2. Core.
  3. Prime.

If Alpha has 5,014.50 USDC of assets and the vault realizes a 6,500 USDC loss, Alpha is wiped first and the remaining 1,485.50 USDC loss is applied to Core.

Accounting Integrity​

The vault's USDC reserve must equal the sum of all tranche assets:

reserve = prime_assets + core_assets + alpha_assets

To maintain this invariant:

  • Deposits transfer USDC into the reserve and increase tranche assets.
  • Yield transfers USDC into the reserve and increases tranche assets.
  • Withdrawals transfer USDC out of the reserve and decrease tranche assets.
  • Losses transfer USDC out of the reserve to a dedicated loss bucket account and decrease tranche assets.

NAV is not the same as market price.

NAV is protocol accounting. Market price is trader behavior.

The two may diverge because market participants price:

  • Expected future yield.
  • Expected future losses.
  • Liquidity.
  • Volatility.
  • Risk appetite.

This divergence is a feature. It makes credit risk visible.