# Borrow Interest Rate

Mitigating liquidity risk through the borrow interest rate model

When capital is available: low interest rates to encourage loans.

When capital is scarce: high interest rates to encourage repayments of loans and additional deposits.

## Interest Rate Model

Both the variable and stable interest models, are derived from the formula above from the Whitepaper with different parameters for each asset.

Variable loans see their rate constantly evolving with utilisation. This means they are not ideal for financial planning.

For rebalancing the stable rate up, these two conditions need to be met:

## Model Parameters

The interest rate parameters have been calibrated per cluster of currencies which share similar risk profiles.

When market conditions change, the interest rate parameters can be adapted. These changes must adapt to utilisation on Aave’s market as well as to incentives across DeFi.

The interest rate curve of SNX is much higher than that of other assets due to the staking incentives of the Synthetix platform. This makes SNX the most utilised pool generating the highest yields.

### Variable Interest Rate Model Parameters

### Stable Interest Rate Model Parameters

The stable rate provides predictability for the borrower which comes at a cost, as the interest rates are higher than the variable rate. However the rate of a stable loan is fixed until the rebalancing conditions are met:

The currencies the most exposed to liquidity risk, TUSD, sUSD and BUSD, do not offer stable rate borrowing.

The base rate of the stable rate model correspond to the average market rate of the asset.

## Interest Rate Parameters Change

When market conditions change, risks change. The utilisation of reserves is continuously monitored to check liquidity is available. In case of prolonged full utilisation, the interest rate parameters are adapted to mitigate any risks emerging from market conditions

## Interest Rate Curves

This section shows Aave's interest rate curves per asset. Please use this spreadsheet for an interactive view based on the current state of the protocol, or to simulate borrows.

### USDC | USDT

### DAI

### TUSD | sUSD | BUSD

### SNX

### MANA | ETH | WBTC

### KNC

### LEND

### BAT | ENJ | LINK | MKR | REN | REP | YFI | ZRX

No stable borrows for ENJ, REN and YFI

## Deposit APY

You can view the protocol's deposit APY on the Aave App for each asset or on this Aave spreadsheet to see the calculations.

Last updated