Pendle/Penpie Liquidation Price

The liquidation price for Pendle/Penpie LP positions can be quite volatile due to the impermanent loss of the position. To estimate the liquidation price in ETH, you can use the following formula:

Liquidation Price Formula:

Liquidation Price=Borrowed ETH Amount×ETH Borrow Factor×ETH Price(Underlying SY Amount+Underlying PT Amount)×LP Collateral Factor\text{Liquidation Price} = \frac{\text{Borrowed ETH Amount} \times \text{ETH Borrow Factor} \times \text{ETH Price}}{(\text{Underlying SY Amount} + \text{Underlying PT Amount}) \times \text{LP Collateral Factor}}

Example: weETH Penpie Position

  1. Deposit and Borrow:

    • Deposit: 1 ETH

    • Borrow: 5 ETH

  2. Net Position After Swap:

    • 5.05 SY weETH

    • 0.75 PT weETH

    • 0.075 YT weETH (excluded, not used as collateral)

  3. Factors:

    • ETH Borrow Factor: 1.1058

    • LP Collateral Factor: 0.95

  4. Assumed Prices:

    • ETH = $3410

    • weETH = $3558

  5. Calculation:

Liquidation Price=5×1.1058×3410(5.05+0.75)×0.95=3421.75 \text{Liquidation Price} = \frac{5 \times 1.1058 \times 3410}{(5.05 + 0.75) \times 0.95} = 3421.75

This means that if weETH depegs to $3421.75, the position will be liquidated.

However, under normal circumstances where weETH remains pegged, the position is unlikely to be liquidated. The liquidation price will adjust in correlation with the ETH price, preventing liquidation as long as the peg holds.

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