Taker Position Expiry

After the end of a fixed term, any given Taker’s Claim or Close transaction will occur at the recorded system time after the end of the fixed period (the user’s Term). Bumper keeps the Taker position active after expiry so that the user does not experience a gap in their protection coverage. However, in order to capture the extra time that a Taker remains in the protocol, a higher “expired” rate for the premium during this period applies, encouraging the user to either close the position or create another for a more economical fixed term.

Specifically, their regular premium is computed for the fixed period plus the expired period, based on their original risk rate. We then compute the ratio of the expired period to the total period, and apply a penalty to the risk rate for this period.

Firstly, compute the premium for the period between the position open time and now:

Premium = premium(pos.CI, current.CI, pos.rate_i)

Then, apply the penalty based on the ratio of the expired period to the entire period:

Expired Premium = premium(pos.CI, current.CI, pos.ratei)
                      * (expired period / (fixed + expired period))
                      * lambda_expired_taker