Maturity

Users can pick a maturity date when refracting a cToken into a pToken and a yToken. Maturity periods for refracted assets can last anywhere from months to years.

For pTokens, the maturity date represents the amount of time that must pass before it can be redeemed for an equivalent amount of cTokens.

If you hold a yToken, you can claim yield rewards at any time up until the yToken's maturity date. The maturity date for a yToken can be thought of as an expiration date for its yield.

Shorter maturity

yTokens with shorter maturity durations may trade at a discount when compared to longer durations because they represent a shorter period to collect yield.

A shorter-dated principal token (pToken) might trade at a smaller discount because the wait time to receive the principal is shorter, which reduces both the time value of money effect and the risks associated with holding the token. Since investors don’t have to wait as long, there’s less uncertainty about future market conditions, interest rate changes, and the underlying asset’s value. This makes shorter-dated pTokens less risky, so they are discounted less heavily compared to longer-dated ones.

Longer maturity

yTokens with longer maturity durations may trade at a premium when compared to shorter durations because they represent a longer period to collect yield.

A principal token (pToken) with a longer maturity might trade at a discount compared to a shorter-dated one because of several factors. First, the time value of money means investors have to wait longer to receive the principal, so the token is more heavily discounted. Second, longer-dated pTokens carry higher interest rate risk—if rates rise, the value of the token drops more sharply, making it riskier to hold. Lastly, there’s more uncertainty around market conditions and the underlying asset's value over a longer period, further contributing to the lower price. Shorter-dated pTokens, with less risk and a quicker payout, typically trade at higher prices.

Example

Imagine an ETH LST called cETH is refracted into pETH and yETH with maturity periods of 1 month and 6 months.

1 month maturity period:

• pETH will tend to trade closer to the price of ETH at this maturity period because the wait time to receive the principal is shorter.
• yETH will trade at a lower price compared to a 6-month maturity period because it represents a shorter period to collect yield.

6 month maturity period:

• pETH will tend to trade at a higher discount compared to a 1-month maturity period because the wait time to receive the principal is longer.
• yETH will tend to trade at a higher price compared to a 1-month maturity period because it represents a longer period to collect yield.

Guide

Visit the maturity trading guide to learn how to trade maturities.