# 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

The return to Lenders is determined as:

$Lending InterestRate = Borrowing InterestRate * Utilisation Rate$

Last modified 1yr ago