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buendiadas/fCash_pricing.md

Last active May 6, 2022 22:05
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On fCash pricing
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fCash_pricing.md
  • fCash is Notional's zero-coupon bond like instrument and derives its value from time to maturity and current interest rate levels:

    • Time to maturity is the time in seconds to a fixed date, where the fCash can be settled into cash

    • There's a notional native market for interest rates that mostly depends on lending vs borrowing volume. This market works as an AMM using the pair (fToken / cToken). A priori, the pair is not expected to have a high volatility, so they provide a curve that works very flat and doesn't trade at pre defined conditions that are considered as limits. Those values are set by governance and currently is ~20% for stablecoin and ~15% for crypto asset pools: image.

    • The value of fCash is calculated as PV(fCash) = fCash * e^ - (oracleRate * timeToMaturity)

      • Oracle rate is defined by the previous AMM, they provide a TWAP to protect from flash loan attacks. This is actually the main concern for us, as we need to decide wether or not this protection is enough for us.
      • If I understood it correctly having the TWAP oracle should be enough for us, because the range will be bounded to 0-20% in worst cases scenarios without twap, since there's no 10/20years bonds, only 1 year maximum
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