Mitigating Decentralized Finance Liquidations with Reversible Call Options

ePrint Report: Mitigating Decentralized Finance Liquidations with Reversible Call Options

Kaihua Qin, Jens Ernstberger, Liyi Zhou, Philipp Jovanovic, Arthur Gervais

Liquidations in DeFi are both a blessing and a curse — whereas liquidations prevent lenders from capital loss, they simultaneously lead to liquidation spirals and system-wide failures. Since most lending and borrowing protocols assume liquidations are indispensable, there is an increased interest in alternative constructions that prevent immediate systemic-failure under uncertain circumstances.


In this work, we introduce reversible call options, …

arthur call capital decentralized defi eprint report finance interest lending loss options protocols report system under