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.

APR % Breakdown

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.