Physical Settlement

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Documentation snapshot 18 October 2026. Deployment · Audit Status

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Physical settlement exchanges assets already held in escrow. When the final observed price is below the barrier, COUPON receives Stock Tokens and SHIELD receives the USDG notional plus unused prefund.

Definition

fact The stock quantity is fixed by the strike price and the quote conversion rate recorded at strike. The maturity price decides whether the barrier is breached, not how many tokens are delivered.

Formula

For six-decimal USDG, 1 USDG of notional is 1,000,000 raw leg units. Stock Tokens use 18 decimals and the stock feed price uses eight decimals.

fact Stock Redemption Rule

stockOut = floor(units × 10^(18 − quoteDecimals) × 10^8 × quoteRateWad / (s0raw × 10^18))

units is the raw leg balance. s0raw is the raw strike feed price in USD per Stock Token. quoteRateWad is the USD value per USDG recorded at strike; at par it is 10^18. Matched stock rounds up at strike; each redemption rounds down.

Worked Arithmetic

illustrative Assume 100,000 USDG of matched notional, a strike price of 180.00 and a strike quote rate of 1 USD per USDG.

illustrative Stock Calculation at Par

Nraw = 100,000 × 10^6 = 100,000,000,000 s0raw = 180 × 10^8 = 18,000,000,000 Matched stock = ceil(Nraw × 10^12 × 10^8 / s0raw) = 555,555,555,555,555,555,556 wei Stock redeemed = floor(Nraw × 10^12 × 10^8 / s0raw) = 555,555,555,555,555,555,555 wei

illustrative The display quantity is 555.5556 NVDA Stock Tokens. A single holder redeeming this full position receives one wei less than the matched amount. Multiple redemptions can leave different residual amounts.

illustrative At a maturity price of 99.00 and the same par quote assumption, the delivered stock is worth 55,000.00 USDG. That is a market valuation, not a USDG redemption. Previously accrued coupons remain separately claimable.

Who Gets What

fact Who Gets What
Holder	Redemption
COUPON	Burns raw leg units and receives Stock Tokens according to the rule above; no coupon accrues for a breached maturity observation
SHIELD	Delivers the matched stock and receives one raw USDG unit per raw leg unit, plus its unused prefund share
Protocol	Receives accrued USDG fees, not the delivered stock

Why Settle Physically

Settlement transfers stock already in escrow rather than selling it into a market.
The strike fixes the stock quantity; the final price supplies the barrier test.
Issuer restrictions and token-transfer failures can still delay receipt. See Issuer Risk.

ERC-8056 Multiplier

fact The stock feed already reflects the issuer’s uiMultiplier. The core transfers raw ERC-20 balances and does not apply the multiplier again. Wallet display balances may use the issuer’s display convention.

Redeeming

After a breached Matured state, redeem(seriesId, units) burns COUPON units and transfers stock. redeemShield(seriesId, units) burns SHIELD units and transfers USDG plus unused prefund. Use previewRedeem for the current payout, and Series Lifecycle for terminal-state and pause conditions.

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