Skip to main content

Interest Rate Response

Response Calculation#

The smart contracts calculate this interest rate response in a non-linear fashion. Larger deviations from the target price have a disproportionately larger interest rate response. The response is an exponential function of the price difference up to a defined certain maximum level. This interest rate response is calculated roughly once a week. The respective time span is the interest rate period.

As the interest rates are calculated by second, the actual numbers are very small. The interest rate response currently runs from +1.83E-9 to -1.83E-9, which is roughly equivalent to +5.9% and -5.6% per annum respectively.

Interest Rate ResponseInterest Rate Response

Asset Interest Rate#

On a weekly basis the interest rate response is added to the previously applied per second interest rate. This result is then capped at 8.19E-9 and floored at 1.28E-10. In per annum terms these values are roughly equivalent to +29.4% and +0.4% respectively.

The benefit of this two-step approach is that a resulting equilibrium interest rate can be found by the algorithm without the need to know in advance what it is or the equilibrium needing to be static.

Liability Interest Rate#

The per second liability interest rate is 3.16E-10 (roughly 1% p.a.) higher than the asset interest rate. On a weekly basis the interest rate response is added to the previously applied per second interest rate. The liability interest rate is capped at 8.512E-9 and floored at 4.44E-10. In per annum terms these values are roughly equivalent to +30.7% and +1.4% respectively.

Translation Interest Rates#

Using compounding.

per annum (52 weeks)per second
25.00%7.10E-09
24.00%6.84E-09
23.00%6.58E-09
22.00%6.32E-09
21.00%6.06E-09
20.00%5.80E-09
19.00%5.53E-09
18.00%5.26E-09
17.00%4.99E-09
16.00%4.72E-09
15.00%4.44E-09
14.00%4.17E-09
13.00%3.89E-09
12.00%3.60E-09
11.00%3.32E-09
10.00%3.03E-09
9.00%2.74E-09
8.00%2.45E-09
7.00%2.15E-09
6.00%1.85E-09
5.00%1.55E-09
4.00%1.25E-09
3.00%9.40E-10
2.00%6.30E-10
1.00%3.16E-10