PT(Principal Token)

Introducing Principal Token(PT)

A PT represents the principal portion of a Yield-Bearing Asset (YBA). If you hold a PT, you will receive the principal portion of the ST at maturity, equivalent to the same amount of the corresponding ST. The value of a PT is the present value of the principal of ST.

Let's consider this scenario:

You spend 1.2 ETH to buy a StETH (YBA) and lock it for 2 years. At the same time, you sell the YT portion of StETH (valued at 0.2 ETH), receiving 0.2 ETH. This leaves you with a PT of StETH (maturing in 2 years). The actual cost you paid for this PT is 1.2 ETH - 0.2 ETH = 1 ETH. At maturity, you will receive 1.2 StETH that you initially purchased.

Valuation of PT

As we have mentioned above, the value of a PT is the present value of the principal of ST.

$$PT = \frac{ST}{(1+Implied\ Yield)^T}$$