[EXAIP-15] Interest Rate Model Parameters Update

• Proposal ID: EXAIP-15
• Proposer: Exactly Core Team
• Date: 07 October 2024

Summary

This proposal introduces an update to the parameters of the Exactly Protocol's Interest Rate Model (EXAIP-08). Eight months have passed since we implemented the upgrade to the Exactly Interest Rate Model (IRM v2), and we now have sufficient data to update the initial parameterization. With this update, we aim to better align the variable interest rate and a more accurate representation of the fixed rate spread model, incorporating adjustments to amplitude and time preference. With this change, the spread model for the fixed interest rate is no longer symmetrical but grows upwards over maturity.

In the specific case of the USDC market, we also considered the adequacy of interest rate levels in light of the forthcoming launch of the Exa App (powered by Exactly Protocol) and the development of the installment payment system, along with its associated credit card for the end consumer.

Technical Implementation

Github commit with the IRM parameters update: https://github.com/exactly/protocol/commit/e07e8a7d8a01e688e44f620434244a512090ab0e

• Actual parameters for the USDC market:

• Simulation with the new parameters for the USDC market:

• Actual parameters for the ETH market:

• Simulation with the new parameters for the ETH market:

• Actual parameters for the wstETH market:

• Simulation with the new parameters for the wstETH market:

• Actual parameters for the OP market:

• Simulation with the new parameters for the OP market:

• Actual parameters for the WBTC market:

• Simulation with the new parameters for the WBTC market:

Conclusion

This proposal (EXAIP-08) presents a revision of the Exactly Protocol's Interest Rate Model parameters, utilizing eight months of data collected since the implementation of IRM v2. The primary objective of this update is to enhance the alignment of the variable interest rate and to reshape the fixed rate spread model, now evolving asymmetrically upwards with increasing maturity.