> For the complete documentation index, see [llms.txt](https://doc.armadillo.is/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://doc.armadillo.is/more-information/premium-calculation.md).

# Premium calculation

We define the dependency between [`CVI`](https://cvi.finance/) and the expected IL percentage for the next 14, 30 and 60 days as a simple quadratic parabola fitted to the historical data.

**Impermanent loss protection price formula is defined as:**

 **(a\* (Xt-Xo)^2+C)\*P**

where: 

a - Stands for the coefficient of the fitted model, and describes the quadratic parabola slope.

Xt - Stands for the level of [CVI](https://cvi.finance/) at the time of IL protection purchase.

Xo - Stands for the level of [CVI](https://cvi.finance/) at the lowest expected IL percentage.

C - Stands for the IL percentage relative to X0.

P - Stands for the premium charged, calculated according to the collateral ratio, this variant is designed to create an equilibrium between the liquidity pool value that is provided to the IL protection and the value covered by the IL protection. For example: We defined at 15% the max IL protection cap, which covers up to 99.7% of IL percentage according to historical data.


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