# Dual NAV & Exchange Rates ## Overview Every River class has **two prices**: an optimistic one used when capital enters, and a conservative one used when capital exits or when the token is read as collateral. They appear across the surface as: | Side | Functions | NAV basis | | --- | --- | --- | | Mint (entry) | `previewDeposit`, `previewMint` — the price deposit servicing uses | **Optimistic** — ignores expected (unrealized) losses; on the wrapper, includes pending accrual | | Redeem (exit / collateral) | `convertToAssets`, `convertToShares`, `previewRedeem`, `previewWithdraw`, exit fills | **Conservative** — reflects impairments; realized value only | The rule in one line: **new capital pays full freight; exiting capital gets the prudent price.** ## Why two prices must exist A single price is exploitable from both directions around any impairment: * If exits priced optimistically, a lender could redeem at the healthy price *ahead of* a marked loss, leaving the loss concentrated on everyone who stayed. * If entries priced conservatively, a depositor could buy in at the impaired price right before a recovery (or before the impairment is lifted) and capture the discrete write-up from existing lenders. Holding the two sides on opposite NAVs closes both games: the gap that an impairment opens between the prices always resolves **in favor of the lenders who stay**. ## Example: impairment and default Senior/junior deal, total NAV 1,100 across 1,000 shares. The servicer marks an expected loss of 500, which later crystallizes at 300. ``` # Healthy optimistic NAV = 1100 conservative NAV = 1100 mint price = 1.10 redeem price = 1.10 # Impaired (expected loss 500 marked, nothing written off yet) optimistic NAV = 1100 conservative NAV = 600 mint price = 1.10 redeem price = 0.60 → exits reprice down instantly; deposits get NO discount for a loss that may never crystallize. # Default (300 written off, 200 of the mark released) optimistic NAV = 800 conservative NAV = 800 mint price = 0.80 redeem price = 0.80 → the two prices reconverge once reality is booked. ``` If one price had been used, a depositor entering at 0.60 during the impairment would have earned the 200 release as instant profit — value taken directly from the lenders who carried the risk. ## Where each side is enforced * **Deposit servicing** mints at the post-settlement optimistic price (`Structure.serviceDeposit` runs settlement first, then prices). * **Exit fills** price at the post-settlement conservative NAV, rounding down. * **The wrapper** extends the same discipline to coupon: `wrap` prices at the gross (accrued-inclusive) value; redemption and `convertToAssets` price realized-only. See [Wrapper Accounting](/accounting/wrapper). * **Collateral integrations** must read `convertToAssets` — it is deliberately the prudent side. ## Rounding policy All conversions use the OpenZeppelin virtual-share offset (inflation-attack resistant) and round in the pool's favor: mint quotes round down (fewer shares), redeem quotes round down (fewer assets), and the residual dust always stays with remaining holders — never with the party transacting.