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Interest Rate Curve

Fenture utilizes Aave’ s interest rate model which is calibrated to manage liquidity risk and optimise utilisation. The use of the protocol determines the rate automatically.

Interest Rate Parameters

  • UoptimalU_{optimal}
    :
    UU
    (Utlisation Rate) is an indicator of the availability of capital within the pool. The optimal utilisation rate U optimal split the interest rate curve into two parts to manage liquidity risk in the pool.
  • Base Variable Borrow Rate
  • Variable Rate Slope 1
  • Variable Rate Slope 2

Interest Rate Model

ifU<Uoptimal:Rt=R0+UtUoptimalRslope1if U<U_{optimal}:R_t=R_0+\frac {U_t} {U_{optimal}} R_{slope1}
ifUUoptimal:Rt=R0+Rslope1+UtUoptimal1UoptimalRslope2if U ≥ U_{optimal}:R_t=R_0+R_{slope1}+\frac {U_t-U_{optimal}} {1-U_{optimal}} R_{slope2}
When
U<UoptimalU < U_{optimal}
​, the borrow interest rates increase slowly with utilization.
When
UUoptimalU ≥ U_{optimal}
, the borrow interest rates increase sharply to incentivize more deposit and avoid liquidity risk.