fix: Adjust applicationo of "unitilizedLeveragePercentage" in calculation of maxBorrow (#192)

* fix: Apply unitilizedLeveragePercentage to maxBorrowCollateral only when levering up

* fix: Add separate unitilizedLeveragePercentage parameter for delevering

Author: ckoopmann

contracts/adapters/MorphoLeverageStrategyExtension.sol

@@ -101,6 +101,7 @@ contract MorphoLeverageStrategyExtension is BaseExtension {
 
     struct ExecutionSettings {
         uint256 unutilizedLeveragePercentage;            // Percent of max borrow left unutilized in precise units (1% = 10e16)
+        uint256 unutilizedLeveragePercentageDelever;     // Percent of max borrow left unutilized when delevering
         uint256 slippageTolerance;                       // % in precise units to price min token receive amount from trade quantities
         uint256 twapCooldownPeriod;                      // Cooldown period required since last trade timestamp in seconds
     }
@@ -161,6 +162,7 @@ contract MorphoLeverageStrategyExtension is BaseExtension {
     );
     event ExecutionSettingsUpdated(
         uint256 _unutilizedLeveragePercentage,
+        uint256 _unutilizedLeveragePercentageDelever,
         uint256 _twapCooldownPeriod,
         uint256 _slippageTolerance
     );
@@ -490,6 +492,7 @@ contract MorphoLeverageStrategyExtension is BaseExtension {
 
         emit ExecutionSettingsUpdated(
             execution.unutilizedLeveragePercentage,
+            execution.unutilizedLeveragePercentageDelever,
             execution.twapCooldownPeriod,
             execution.slippageTolerance
         );
@@ -960,6 +963,10 @@ contract MorphoLeverageStrategyExtension is BaseExtension {
             _execution.unutilizedLeveragePercentage <= PreciseUnitMath.preciseUnit(),
             "Unutilized leverage must be <100%"
         );
+        require (
+            _execution.unutilizedLeveragePercentageDelever <= PreciseUnitMath.preciseUnit(),
+            "Unutilized leverage on delever must be <100%"
+        );
         require (
             _execution.slippageTolerance <= PreciseUnitMath.preciseUnit(),
             "Slippage tolerance must be <100%"
@@ -1123,14 +1130,16 @@ contract MorphoLeverageStrategyExtension is BaseExtension {
         // Note NetBorrow Limit is already denominated in borrow asset
         uint256 netBorrowLimit = _actionInfo.collateralBalance
             .mul(_actionInfo.collateralPrice).div(MORPHO_ORACLE_PRICE_SCALE)
-            .preciseMul(_actionInfo.lltv)
-            .preciseMul(PreciseUnitMath.preciseUnit().sub(execution.unutilizedLeveragePercentage));
+            .preciseMul(_actionInfo.lltv);
+
         if (_isLever) {
             return netBorrowLimit
+                .preciseMul(PreciseUnitMath.preciseUnit().sub(execution.unutilizedLeveragePercentage))
                 .sub(_actionInfo.borrowBalance)
                 .mul(MORPHO_ORACLE_PRICE_SCALE).div(_actionInfo.collateralPrice);
         } else {
             return _actionInfo.collateralBalance
+                .preciseMul(PreciseUnitMath.preciseUnit().sub(execution.unutilizedLeveragePercentageDelever))
                 .preciseMul(netBorrowLimit.sub(_actionInfo.borrowBalance))
                 .preciseDiv(netBorrowLimit);
         }

test/integration/ethereum/morphoLeverageStrategyExtension.spec.ts

@@ -385,6 +385,7 @@ if (process.env.INTEGRATIONTEST) {
       const rebalanceInterval = BigNumber.from(86400);
 
       const unutilizedLeveragePercentage = ether(0.01);
+      const unutilizedLeveragePercentageDelever = ZERO;
       const twapMaxTradeSize = ether(0.5);
       const twapCooldownPeriod = BigNumber.from(3000);
       const slippageTolerance = ether(0.01);
@@ -412,6 +413,7 @@ if (process.env.INTEGRATIONTEST) {
       };
       execution = {
         unutilizedLeveragePercentage: unutilizedLeveragePercentage,
+        unutilizedLeveragePercentageDelever: unutilizedLeveragePercentageDelever,
         twapCooldownPeriod: twapCooldownPeriod,
         slippageTolerance: slippageTolerance,
       };
@@ -473,6 +475,7 @@ if (process.env.INTEGRATIONTEST) {
         };
         subjectExecutionSettings = {
           unutilizedLeveragePercentage: ether(0.01),
+          unutilizedLeveragePercentageDelever: ZERO,
           twapCooldownPeriod: BigNumber.from(120),
           slippageTolerance: ether(0.01),
         };
@@ -553,6 +556,9 @@ if (process.env.INTEGRATIONTEST) {
         expect(execution.unutilizedLeveragePercentage).to.eq(
           subjectExecutionSettings.unutilizedLeveragePercentage,
         );
+        expect(execution.unutilizedLeveragePercentageDelever).to.eq(
+          subjectExecutionSettings.unutilizedLeveragePercentageDelever
+        );
         expect(execution.twapCooldownPeriod).to.eq(subjectExecutionSettings.twapCooldownPeriod);
         expect(execution.slippageTolerance).to.eq(subjectExecutionSettings.slippageTolerance);
       });
@@ -650,6 +656,16 @@ if (process.env.INTEGRATIONTEST) {
         });
       });
 
+      describe("when unutilizedLeveragePercentageDelever is >100%", async () => {
+        beforeEach(async () => {
+          subjectExecutionSettings.unutilizedLeveragePercentageDelever = ether(1.1);
+        });
+
+        it("should revert", async () => {
+          await expect(subject()).to.be.revertedWith("Unutilized leverage on delever must be <100%");
+        });
+      });
+
       describe("when slippage tolerance is >100%", async () => {
         beforeEach(async () => {
           subjectExecutionSettings.slippageTolerance = ether(1.1);
@@ -2967,7 +2983,6 @@ if (process.env.INTEGRATIONTEST) {
             );
 
             const expectedFirstPositionUnit = initialPositions[0].unit.sub(maxRedeemCollateral);
-            console.log("expectedFirstPositionUnit", expectedFirstPositionUnit.toString());
 
             expect(initialPositions.length).to.eq(2);
             expect(currentPositions.length).to.eq(2);
@@ -3430,6 +3445,7 @@ if (process.env.INTEGRATIONTEST) {
             const oldExecution = await leverageStrategyExtension.getExecution();
             const newExecution: ExecutionSettings = {
               unutilizedLeveragePercentage: oldExecution.unutilizedLeveragePercentage,
+              unutilizedLeveragePercentageDelever: ZERO,
               twapCooldownPeriod: oldExecution.twapCooldownPeriod,
               slippageTolerance: ether(0.05),
             };
@@ -3851,6 +3867,7 @@ if (process.env.INTEGRATIONTEST) {
       const initializeSubjectVariables = () => {
         subjectExecutionSettings = {
           unutilizedLeveragePercentage: ether(0.05),
+          unutilizedLeveragePercentageDelever: ZERO,
           twapCooldownPeriod: BigNumber.from(360),
           slippageTolerance: ether(0.02),
         };
@@ -3872,6 +3889,9 @@ if (process.env.INTEGRATIONTEST) {
           expect(execution.unutilizedLeveragePercentage).to.eq(
             subjectExecutionSettings.unutilizedLeveragePercentage,
           );
+          expect(execution.unutilizedLeveragePercentageDelever).to.eq(
+            subjectExecutionSettings.unutilizedLeveragePercentageDelever,
+          );
           expect(execution.twapCooldownPeriod).to.eq(subjectExecutionSettings.twapCooldownPeriod);
           expect(execution.slippageTolerance).to.eq(subjectExecutionSettings.slippageTolerance);
         });
@@ -3881,6 +3901,7 @@ if (process.env.INTEGRATIONTEST) {
             .to.emit(leverageStrategyExtension, "ExecutionSettingsUpdated")
             .withArgs(
               subjectExecutionSettings.unutilizedLeveragePercentage,
+              subjectExecutionSettings.unutilizedLeveragePercentageDelever,
               subjectExecutionSettings.twapCooldownPeriod,
               subjectExecutionSettings.slippageTolerance,
             );

utils/types.ts

@@ -73,6 +73,7 @@ export interface MethodologySettings {
 
 export interface ExecutionSettings {
   unutilizedLeveragePercentage: BigNumber;
+  unutilizedLeveragePercentageDelever: BigNumber;
   twapCooldownPeriod: BigNumber;
   slippageTolerance: BigNumber;
 }