> ## Documentation Index
> Fetch the complete documentation index at: https://injectivelabs-docs-ai-sdk.mintlify.site/llms.txt
> Use this file to discover all available pages before exploring further.

# State Transitions

# State Transitions

This document describes the state transition operations pertaining to:

* Creating an insurance fund
* Underwriting an insurance fund
* Request a redemption from the insurance fund
* Automatic processing of matured redemption requests

## Creating insurance fund

**Params description**
`Sender` field describes the creator of an insurance fund .
`Ticker`, `QuoteDenom`, `OracleBase`, `OracleQuote`, `OracleType`, `Expiry` fields describe the derivative market info
that the insurance fund associated to.
`InitialDeposit` field describes the initial deposit amount to be put on the insurance fund.

**Steps**

* Get `MarketId` for the insurance fund - **Note**, market could be not available yet on `exchange` and it's not an
  issue
* Ensure if insurance fund associated to the `MarketId` does not exist
* Ensure if initial deposit amount is not zero
* Get `shareDenom` that is unique - it's incremented when share denom is requested for insurance fund creation or when
  underwriting insurance fund that has zero balance and non-zero total share denom supply.
* Send coins from creator's account to insurance fund module account
* Create insurance fund object with `DefaultRedemptionNoticePeriodDuration` and with the params provided
* Set `Balance` of fund object to initial deposit amount
* Mint `InsuranceFundInitialSupply` (10^18) `shareDenom` tokens to creator account
* Save insurance fund object to store
* Register newly created insurance fund `shareDenom` metadata inside BankKeeper

## Underwriting an insurance fund

**Params description**
`Sender` field describes the underwriter of an insurance fund .
`MarketId` field describes the derivative market id to the insurance fund.
`Deposit` field describes the deposit amount to be added on the insurance fund.

**Steps**

* Ensure if insurance fund associated to the `MarketId` does exist
* Send underwriting tokens from sender's account to module account
* Make actions based on the status of insurance fund associated to the `MarketId`.
  * A. when `Balance` and `ShareDenomSupply` are zero
    1. mint `InsuranceFundInitialSupply` (10^18) to the sender.
    2. set `Balance` to deposit amount
    3. set `ShareDenomSupply` to `InsuranceFundInitialSupply`
  * B. when `Balance` is zero and `ShareDenomSupply` is not zero
    1. change `ShareDenom` of the the insurance fund to start new insurance fund from beginning.
    2. register newly created `ShareDenom` in bank keeper
    3. mint `InsuranceFundInitialSupply` (10^18) to the sender.
    4. set `Balance` to deposit amount
    5. set `ShareDenomSupply` to `InsuranceFundInitialSupply`
  * C. when `Balance` is not zero and `ShareDenomSupply` is zero
    1. mint `InsuranceFundInitialSupply` (10^18) to the sender.
    2. increase `Balance` by deposit amount
    3. set `ShareDenomSupply` to `InsuranceFundInitialSupply`
  * D. when both `Balance` and `ShareDenomSupply` are not zero - normal case
    1. increase `Balance` by deposit amount
    2. mint `prev_ShareDenomSupply * deposit_amount / prev_Balance` amount of `ShareDenom` to sender
    3. increase `ShareDenomSupply` with mint amount
* Save insurance fund object to store

## Requesting a redemption from an insurance fund

**Params description**
`Sender` field describes the redemption requester of an insurance fund .
`MarketId` field describes the derivative market id associated to the insurance fund.
`Amount` field describes the share token amount to be redeemed.

**Steps**

* Ensure insurance fund associated to the `MarketId` does exist
* Send `ShareDenom` to module account
* Get new redemption schedule ID
* Calculate `ClaimTime` from insurance fund's redemption notice period duration and current block time
* Calculate key to store pending redemption (redemption schedule)
* Create redemption schedule object with details
* Store redemption schedule object to store

## Insurance fund actions on liquidation events in derivative market

**Steps**

* `exchange` module finds relative insurance fund from the insurance keeper.
* if `missingFund` is positive, it withdraws the amount from the insurance fund through `WithdrawFromInsuranceFund`.
* if `missingFund` is negative, it deposits the amount into the insurance fund through `DepositIntoInsuranceFund`.

## Automatic processing of pending redemptions

**Steps**

Iterate all matured redemptions by sorted order by `ClaimTime` and perform the following actions:

* If `ClaimTime` is after current block time, break early
* Ensure the insurance fund exist for matured redemption schedule
* Calculate redeem amount from share amount - `shareAmt * fund.Balance * fund.TotalShare`
* Send calculate redeem amount from module account to redeemer account
* Burn share tokens sent to the module account at the time of redemption schedule
* Delete redemption schedule object
* Reduce insurance fund's `Balance` by redeem amount
* Store updated insurance object to store

# Hooks

Other modules may register operations to execute when a certain event has occurred within insurance fund. These events
can be registered to execute either right `Before` or `After` the exchange event (as per the hook name). The following
hooks can registered with the exchange:

**Note**: Hooks are not available and exchange module calls insurance keeper function directly.

**Steps**
When liquidation event happen in derivative market

* `exchange` module finds relative insurance fund from the insurance keeper.
* if `missingFund` is positive, it withdraws the amount from the insurance fund through `WithdrawFromInsuranceFund`.
* if `missingFund` is negative, it deposits the amount into the insurance fund through `DepositIntoInsuranceFund`.