# Interest Rate Response

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Response CalculationThe 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.

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Asset Interest RateOn 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.

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Liability Interest RateThe 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.

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Translation Interest RatesUsing 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 |