Borrowing
Borrowers can initiate a loan by tranching their collateral, and then selling their safe tranches to lenders for cash. As explained in the user guide, Borrowers can either 'Sell Bonds' on the spot market, or place an 'Ask Order' by providing liquidity at their desired price.
Example
A user wants to borrow $1000 using AMPL as collateral
There is an AMPL bond currently available with the following state:
Matures in 6 months
20/30/50 ratios
The A-Tranche is currently trading for a slight discount of $0.90
The B-Tranche is currently trading for a larger discount of $0.70
Now the user has a range of choices which trade-off collateralization rate for interest rate:
Low collateralization, high interest
The borrower deposits 2600 AMPL
In return they receive:
520 A-Tranches (2600 * 0.2)
780 B-Tranches (2600 * 0.3)
1300 Z-Tranches (2600 * 0.5)
They sell all of their A-Tranches for $468 (520 * 0.90)
They sell all of their B-Tranches for $546 (780 * 0.70)
They now have the following:
$1014 in cash from selling their tranche tokens
1300 Z-tranches, representing an expected future value of 1300 AMPL, plus/minus all of the next 5-6 months of AMPL value changes
They paid an "interest rate" of ~22% ((1300 - 1014) / (1300))
High collateralization, low interest
The borrower deposits 6000 AMPL
In return they receive:
1200 A-Tranches (6000 * 0.2)
1800 B-Tranches (6000 * 0.3)
3000 Z-Tranches (6000 * 0.5)
They sell all of their A-Tranches for $1080 (1200 * 0.9)
They now have the following:
$1080 in cash from selling their A-Tranche tokens
1800 B-Tranches, representing a likely future value of 1800 AMPL
3000 Z-Tranches, representing a future value of 3000 AMPL, plus/minus all of the next 5-6 months of AMPL value changes
They paid an "interest rate" of 10% ((1200 - 1080) / (1200))
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