Fees (APR)
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).
Loan-to-Value (LTV) | APR (Yearly) |
|---|---|
15% | ~1% |
30% | ~16.5% |
50% | ~76% |
Below are the inputs we currently use for the calculation. You can find all of our deployed contracts here, look for "PremiumPricer."
Input Variable | Value |
|---|---|
S (Current NFT Average Floor) | Average NFT Floor Price |
K (Strike or Borrow Amount) | Your Borrowed Amount |
σ (Volatility) | 225% |
r (risk-free rate) | 8% |
t (time to expiration) | 1 month |
All the complexities of the put options are entirely abstracted from the user. They see a standard APR for their loan.
The Black Scholes Pricing Model creates a system that incentivizes healthier borrowing, in other words, those who have low Loan-To-Value loans pay significantly less than high Loan-To-Value. This safeguards our protocol from onboarding too much risk.
Last modified 3mo ago