Parity Arbitrage Right (PAR)

Since the underlying USD0 for USD0++ is locked, there is no open arbitrage mechanism for when USD0++ is priced below USD0. To address this, the DAO can unlock the USD0 before the USD0++ matures if deemed necessary under DAO governance. This action allows USD0++ to be redeemable for its USD0 if the market price of USD0++ becomes depegged.

Market Valuation of USD0++

USD0 Liquid Bond Token has free market pricing. At first glance, one might think it would be valued at a premium because it’s USD0 with rewards on top. However, due to its maturity, it could exhibit more volatility. To ensure a fair price at parity with USD0, USD0 ++ has access under certain conditions to the underlying risk-free yield through Base Interest Guarantee (BIG) mechanism. Given these features, the expected market fair value should be at parity. To ensure safety in the crypto space, the Usual DAO has the right to unlock a bond through the Parity Arbitrage Right (PAR).

PAR and Redemption Mechanism for Liquid Bonds

The Usual protocol has a unique prerogative that allows it to unlock an LBT under specific conditions deemed beneficial by the protocol's governance. In instances where the Liquid Bond is traded at a value significantly below its fair value, Usual can intervene by redeeming the bond. This arbitrage mechanism ensures that the protocol can maintain stability and protect the interests of its participants while making an instant profit for the treasury.