Risk Management and Hedging
Loan-to-Value (LTV) and Safety Fee Integration
LTV ratios are a crucial component of the Moon Module's risk management strategy. The LTV ratio determines the maximum loan amount relative to the collateral's value. Safety fees, which are a percentage of the loan value, are integrated into this model to account for the cost of premiums on the put options. These fees are essential for funding the hedging pool that underpins the Moon Module's protective measures.
Borrowing Fees
Borrowing fees have two components:
Deposit Fee: A deposit fee component is returned upon repayment of a loan, encouraging good borrowing behavior.
Safety Fee: This fee is paid to the foundation when a borrow is made and it goes to the hedging pool
The throttle module calculates the lending/borrowing fees according to the demand/supply of the liquidity pool
Borrowers can deposit collateral (e.g., BONK) to take out loans of USDT. The LTV ratio is set by an additional module, ranging based on liquidity and other market-wide properties.
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