Interest Rate Model
Lending & Borrowing interest rates
Lending and Borrowing interest rates are calculated due to Utilisation rate
$UtilisationRate = Total Borrow / TotalLend$
$Borrowing Rate = rf + 2*UtilisationRate*rf$
• rf - risk fee free rate: the rate at which #dev DeFi manages to get from other quasi-risk-free protocols.
Borrowing interest rate model uses the Kick parameter which follows a jump rate model.
$BorrowingInterestRate = (max - rKick)*UtilisationRate/(1-Kick) - (max*Kick - rKick)/(1-Kick)$
Borrowing interest rate model
• Kick: the point in the model where the rate of increase in Borrowing interest rate with respect to Utilization rate is at a higher rate, the value of Kick point is determined at 80%.
• rKick - rate at Kick: value of Borrowing interest rate at Kick.
• Max: maximum value of Borrowing interest rate which is calculated at 100% Utilisation rate
$Lending InterestRate = Borrowing InterestRate * Utilisation Rate$