Terminology

Definitions and terminology relating to Term's digital repo transactions.

Purchase Price

The price at which collateral tokens are transferred by a borrower to a lender in a repo transaction and can be thought of as the amount borrowed in a repo agreement.

Repurchase Price

The price at which collateral tokens are to be transferred back to a borrower upon maturity or termination of a repo transaction. The difference between the repurchase price and the purchase price reflects the interest earned by the lender/owed by the borrower and is calculated by applying the pricing rate over the term of a repo transaction. The formula for determination of the repurchase price can be found in Conventions section.

Price Differential

The price differential is the difference between the repurchase price and purchase price in a repo transaction and can be viewed as the interest earned by the lender/owed by the borrower over the term of a repo transaction.

Pricing Rate (Repo Rate)

The per annum percentage rate for determination of the repurchase price, also known as the "repo rate".

Purchase Date

The purchase date is the date on which the purchased tokens are to be transferred by borrower to the lender.

Repurchase Date

The date on which the borrower is to repurchase the collateral tokens from lender.

Repurchase Window

A window of time beginning on the repurchase date and typically lasting 12 to 24 hours during which repurchase must occur.

Purchase Token

The base digital currency in which the purchase price and repurchase price are de-nominated.

Collateral Token

The digital asset "sold" to the lender as part of a repo transaction that serves a collateral for a borrower's loan.

Initial Margin Ratio

The ratio of the value of collateral tokens to the purchase price required to bid in a Term auction, quoted as a percentage rate. This is a function of the purchase price because the pricing rate is not known until after all bids have been submitted and an auction has been cleared. The initial margin requirement is typically higher than the maintenance margin requirement to maintain a buffer against liquidation.

Maintenance Margin Ratio

The ratio of the value of collateral tokens to the repurchase price required to avoid liquidation.

Market Value of Collateral

The market value with respect to any collateral tokens as of any point in time based on the price for such collateral tokens obtained via real-time Chainlink oracle feeds.

Transaction Exposure

Transaction exposure measures the margin deficit or excess of an account. We apply the maintenance margin ratio to the current market value of collateral based on Chainlink oracle feeds and compare that to the repurchase price as shown here. Where an account is in margin deficit (negative transaction exposure) its collateral is eligible for liquidation.

Margin Excess

Where the market value of collateral of a borrower exceeds the maintenance margin ratio multiplied by the repurchase price owed by such borrower, the borrower is said to be in margin excess.

Margin Deficit

Where the market value of collateral of a borrower is less than the maintenance margin ratio multiplied by the repurchase price owed by such borrower, the borrower is said to be in margin deficit.

Liquidated Damages

Liquidated damages are a surcharge to the amount of collateral seized in liquidations when valued at fair market value measured as a percentage rate. The surcharge is split between the portion that goes to the liquidator (liquidation incentive) and the portion that accrues to the protocol (protocol liquidated damages) such that:

$\text{liquidatedDamages} = \text{liquidatorIncentive} +\text{protocolLiquidatedDamages}$

Liquidator Incentive

The liquidation incentive is the portion of the liquidated damages that accrues to the liquidator.

Protocol Liquidated Damages

Protocol liquidated damages are the portion of the liquidated damages that accrues to the protocol.

Recovery Rate

The rate at which all lenders to a term pool recover in the event that after all repurchases and liquidations are accounted for, there is insufficient purchase tokens to allow for 1:1 redmption of repo tokens.

De Minimis Collateral Threshold

The de minimis collateral threshold is the value where liquidation protection will no longer be enforced to avoid an infinite loop of partial liquidations. It is measured as the market value of collateral less the Protocol's outstanding repurchase exposure to that borrower.