A Fixed Rate Market Still Needs a Price
After looking at how FTs can trade before maturity, the next question for me was:
How is the fixed rate actually determined?
If TermMax offers fixed rates, there still has to be a pricing mechanism.
At what rate?
And how much liquidity is available at that rate?
That’s where the pricing curve becomes interesting.
Instead of having one fixed rate for the entire market, TermMax can use range orders with different pricing levels.
I think of it as a ladder.
One portion of liquidity can be available at one rate.
As that liquidity gets consumed, the next portion can have a different rate.
So the market isn’t simply:
“Borrow at 6%.”
It can look more like:
“Some liquidity at 6%.”
“More at 6.5%.”
“Then the rate changes again.”
For me, this is the interesting part to analyze.
The rate isn’t just a number.
It depends on how much liquidity is available and how that liquidity is structured.
#termmax @TermMax
After looking at how FTs can trade before maturity, the next question for me was:
How is the fixed rate actually determined?
If TermMax offers fixed rates, there still has to be a pricing mechanism.
At what rate?
And how much liquidity is available at that rate?
That’s where the pricing curve becomes interesting.
Instead of having one fixed rate for the entire market, TermMax can use range orders with different pricing levels.
I think of it as a ladder.
One portion of liquidity can be available at one rate.
As that liquidity gets consumed, the next portion can have a different rate.
So the market isn’t simply:
“Borrow at 6%.”
It can look more like:
“Some liquidity at 6%.”
“More at 6.5%.”
“Then the rate changes again.”
For me, this is the interesting part to analyze.
The rate isn’t just a number.
It depends on how much liquidity is available and how that liquidity is structured.
#termmax @TermMax
