InfinityPools
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  • Term structure
  • Interest rate
  1. Protocol Overview
  2. Mechanism details
  3. Loan styles

Fixed term loan

Last updated 1 year ago

Term structure

The first loan type, called a fixed term loan, is used for lower levels of leverage (~1-40x on high market cap assets). The full interest needs to be paid upfront by the borrower, is non refundable and as such, is cheaper for borrowers.

The protocol will disburse the interest paid to the liquidity range lenders according to the . While the loan has a predetermined duration, borrowers can take profit on their trade at any point by swapping the borrowed assets back to their original token (eg. swapping ETH back to USDC in the ).

Interest rate

Supposing that the pool price follows a geometric Brownian motion with no drift (ie. which is a martingale), then the fair value interest rate on a fixed term loan can be computed as:

λ2qmq−12−1\frac{\lambda}{2qm^{q-\frac{1}{2}}-1}2qmq−21​−1λ​ where q=14+2λvq = \sqrt{\frac{1}{4} + \frac{2\lambda}{v}}q=41​+v2λ​​

per day (times 100 in percentage terms).

  • m is the ‘absolute’ moneyness (the distance between the pool price and the strike price), which is the maximum of kp\frac{k}{p}pk​and pk\frac{p}{k}kp​where p is the pool price and k is the

  • ν is the daily variance of the price, ie. quadratic variation of the logarithm of price over one day

  • λ=ln(2) as previously defined

maturity schedule
original example
strike price