# 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.

- $U_{optimal}$:$U$
*(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

$if U<U_{optimal}:R_t=R_0+\frac {U_t} {U_{optimal}} R_{slope1}$

$if U ≥ U_{optimal}:R_t=R_0+R_{slope1}+\frac {U_t-U_{optimal}} {1-U_{optimal}} R_{slope2}$

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.Last modified 11mo ago