# 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

* $$U\_{optimal}$$: $$U$$*(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

$$
if U\<U\_{optimal}:R\_t=R\_0+\frac {U\_t} {U\_{optimal}} R\_{slope1}
$$

$$
if U ≥ U\_{optimal}:R\_t=R\_0+R\_{slope1}+\frac {U\_t-U\_{optimal}} {1-U\_{optimal}} R\_{slope2}
$$

When $$U < U\_{optimal}$$ ​, the borrow interest rates increase slowly with utilization.

When $$U ≥ U\_{optimal}$$, the borrow interest rates increase sharply to incentivize more deposit and avoid liquidity risk.


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