Settlement Reference

If PnL ≥ 0:
    Amount Returned = Borrowed + PnL

If PnL < 0:
    Amount Returned = Borrowed - |PnL|

Settlement call:

settle(int256 pnl)

Settlement Checklist

Before calling settle():

• Epoch duration has elapsed

• All contract interactions must use base units (raw token amounts).

• Total borrowed amount is accurately tracked (If borrowed)

• Token approval is set for the vault contract

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Settlement Scenarios

1. Borrowed Capital with Profit

Parameter	Value
Borrowed	8 USDC
PnL	+1 USDC

Conversion (USDC, 6 decimals):

• Borrowed = 8,000,000

• PnL = 1,000,000

• Return = 9,000,000

Execution

Transfer:

9000000

Call:

settle(1000000)

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2. Borrowed Capital with Loss

Parameter	Value
Borrowed	8 USDC
PnL	-2 USDC

Conversion (USDC, 6 decimals):

• Borrowed = 8,000,000

• PnL = -2,000,000

• Return = 6,000,000

Execution

Transfer:

6000000

Call:

settle(-2000000)

Losses are reflected by returning less capital. No additional capital injection is required.

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3. No Borrowing with Profit

Parameter	Value
Borrowed	0
PnL	+1 USDC

Conversion (USDC, 6 decimals):

• Borrowed = 0

• PnL = 1,000,000

• Return = 1,000,000

Execution

Transfer:

1000000

Call:

settle(1000000)

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4. No Borrowing with Loss

This scenario is not permitted as-is.

If no capital was borrowed during the epoch, the trader cannot settle with a negative PnL directly, since the contract enforces that losses cannot exceed borrowed capital.

A negative pnl is only valid if there is sufficient recorded borrowed balance.

Resolution

If the strategy resulted in a loss but no capital had previously been borrowed, the trader must first borrow the required amount from the vault, then settle using the negative PnL value.

Example

Parameter	Value
Initial Borrowed	0 USDC
Realized PnL	-1 USDC

Since Borrowed = 0, calling settle(-1 USDC) directly is invalid.

Required process:

1. Borrow the required amount

2. Approve the vault

3. Call settlement with the negative PnL

Conversion (USDC, 6 decimals):

• Borrow = 1000000

• PnL = -1000000

• Return amount at settlement = 0

Execution

Borrow:

borrow(1000000)

Approve:

approve(vault, 0)

Call:

settle(-1000000)

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Summary

• Settlement enforces final PnL onchain

• Return amount must reflect borrowed capital ± PnL

• All values must be provided in base units

• settle(pnl) finalizes the epoch