Bankruptcy and Liquidation Price Calculator

bankruptcy_and_liquidation_px_calc.ipynb

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 "cells": [
  {
   "cell_type": "markdown",
   "metadata": {},
   "source": [
    "# Bankruptcy and liquidation price\n",
    "### DerivaDEX"
   ]
  },
  {
   "cell_type": "code",
   "execution_count": 1,
   "metadata": {},
   "outputs": [],
   "source": [
    "%reload_ext autoreload\n",
    "%autoreload 2\n",
    "%matplotlib inline"
   ]
  },
  {
   "cell_type": "code",
   "execution_count": 2,
   "metadata": {},
   "outputs": [],
   "source": [
    "# imports"
   ]
  },
  {
   "cell_type": "markdown",
   "metadata": {},
   "source": [
    "## Bankruptcy price"
   ]
  },
  {
   "cell_type": "code",
   "execution_count": 3,
   "metadata": {},
   "outputs": [],
   "source": [
    "def compute_bankruptcy_px(collateral, position_side, position_size, avg_entry_px, mark_px):\n",
    "    unrealized_pnl = position_size * position_side * (mark_px - avg_entry_px)\n",
    "    total_account_value = collateral + unrealized_pnl\n",
    "    return mark_px - position_side * (total_account_value / position_size)"
   ]
  },
  {
   "cell_type": "markdown",
   "metadata": {},
   "source": [
    "### Alice"
   ]
  },
  {
   "cell_type": "code",
   "execution_count": 5,
   "metadata": {},
   "outputs": [],
   "source": [
    "collateral = 10_000\n",
    "position_side = 1\n",
    "position_size = 4\n",
    "avg_entry_px = 10_000\n",
    "mark_px = 11_000"
   ]
  },
  {
   "cell_type": "code",
   "execution_count": 6,
   "metadata": {},
   "outputs": [
    {
     "data": {
      "text/plain": [
       "7500.0"
      ]
     },
     "execution_count": 6,
     "metadata": {},
     "output_type": "execute_result"
    }
   ],
   "source": [
    "compute_bankruptcy_px(collateral, position_side, position_size, avg_entry_px, mark_px)"
   ]
  },
  {
   "cell_type": "markdown",
   "metadata": {},
   "source": [
    "### Bob"
   ]
  },
  {
   "cell_type": "code",
   "execution_count": 7,
   "metadata": {},
   "outputs": [],
   "source": [
    "collateral = 20_000\n",
    "position_side = -1\n",
    "position_size = 4\n",
    "avg_entry_px = 10_000\n",
    "mark_px = 11_000"
   ]
  },
  {
   "cell_type": "code",
   "execution_count": 8,
   "metadata": {},
   "outputs": [
    {
     "data": {
      "text/plain": [
       "15000.0"
      ]
     },
     "execution_count": 8,
     "metadata": {},
     "output_type": "execute_result"
    }
   ],
   "source": [
    "compute_bankruptcy_px(collateral, position_side, position_size, avg_entry_px, mark_px)"
   ]
  },
  {
   "cell_type": "markdown",
   "metadata": {},
   "source": [
    "## Liquidation price"
   ]
  },
  {
   "cell_type": "code",
   "execution_count": 9,
   "metadata": {},
   "outputs": [],
   "source": [
    "def compute_liquidation_px(collateral, position_side, position_size, avg_entry_px, mmr):\n",
    "    return (collateral - position_size * position_side * avg_entry_px) / (position_size * (mmr - position_side))"
   ]
  },
  {
   "cell_type": "markdown",
   "metadata": {},
   "source": [
    "### Alice"
   ]
  },
  {
   "cell_type": "code",
   "execution_count": 10,
   "metadata": {},
   "outputs": [],
   "source": [
    "collateral = 10_000\n",
    "position_side = 1\n",
    "position_size = 4\n",
    "avg_entry_px = 10_000\n",
    "mmr = 0.03"
   ]
  },
  {
   "cell_type": "code",
   "execution_count": 11,
   "metadata": {},
   "outputs": [
    {
     "data": {
      "text/plain": [
       "7731.958762886598"
      ]
     },
     "execution_count": 11,
     "metadata": {},
     "output_type": "execute_result"
    }
   ],
   "source": [
    "compute_liquidation_px(collateral, position_side, position_size, avg_entry_px, mmr)"
   ]
  },
  {
   "cell_type": "markdown",
   "metadata": {},
   "source": [
    "### Bob"
   ]
  },
  {
   "cell_type": "code",
   "execution_count": 13,
   "metadata": {},
   "outputs": [],
   "source": [
    "collateral = 20_000\n",
    "position_side = -1\n",
    "position_size = 4\n",
    "avg_entry_px = 10_000\n",
    "mark_px = 11_000"
   ]
  },
  {
   "cell_type": "code",
   "execution_count": 14,
   "metadata": {},
   "outputs": [
    {
     "data": {
      "text/plain": [
       "14563.106796116504"
      ]
     },
     "execution_count": 14,
     "metadata": {},
     "output_type": "execute_result"
    }
   ],
   "source": [
    "compute_liquidation_px(collateral, position_side, position_size, avg_entry_px, mmr)"
   ]
  }
 ],
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