APR = Put Option Premium
The protocol recalculates the put option premium daily, which becomes a borrower's accrued fee. We use the Black-Scholes Formula for this calculation.
Below are the calculations for approximate APRs users would pay based on their loan-to-value ratio (risk).
Below are the inputs we currently use for the calculation. You can find all of our deployed contracts here, look for "PremiumPricer."
All the complexities of the put options are entirely abstracted from the user. They see a standard APR for their loan.