Interest Rate Model

A given borrower's interest rate will vary based on the asset they are borrowing and the utilization of the lending asset in the tranche – since each tranche’s pool of borrowable assets is isolated. 
The interest rate Rt follows the model developed by Aave:
ifU<Uoptimal:Rt=R0+UtUoptimalRslope1if\hspace{.1cm}U < U_{optimal} : R_t = R_0 + \frac{U_t}{U_{optimal}} R_{slope\hspace{.05cm}1}ifU<Uoptimal​:Rt​=R0​+Uoptimal​Ut​​Rslope1​
ifU≥Uoptimal:Rt=R0+Rslope1+Ut−Uoptimal1−UoptimalRslope2if\hspace{.1cm}U \geq U_{optimal} : R_t = R_0 +R_{slope\hspace{.05cm}1}+\frac{U_t-U_{optimal}}{1-U_{optimal}} R_{slope\hspace{.05cm}2}
ifU≥Uoptimal​:Rt​=R0​+Rslope1​+1−Uoptimal​Ut​−Uoptimal​​Rslope2​
Last modified 2mo ago