I spent some time today following a TermMax position from borrowing to repayment, and I realized the interesting part isn’t just the fixed rate. It’s what happens around that rate when the market starts moving.
If a borrower repays with discounted FTs instead of debt tokens, who actually absorbs the difference between the FT’s market price and face value? I understand why the borrower might prefer that route, but I’m still thinking through where the economic cost ultimately lands.
The range-order design also made more sense after looking at opposing curves. Could borrowing and lending orders together form something resembling a natural yield curve? If so, what determines its shape when liquidity changes?
I initially thought a two-way order might be close to market-neutral. I’m less convinced now. If demand shifts heavily toward one side, wouldn’t inventory, rate, and duration exposure still matter?
The Leverager raises another issue. Atomic execution can simplify recursive looping, but the position still has to respect MLTV and liquidation LTV. So is the real advantage lower execution complexity rather than lower leverage risk?
That distinction matters.
I’m also wondering how we should measure whether customizable curves genuinely improve capital efficiency. More flexibility can create better pricing, but it can also fragment liquidity and make markets harder to read.
At what point does customization stop helping efficiency and start creating complexity?
#termmax @TermMax
If a borrower repays with discounted FTs instead of debt tokens, who actually absorbs the difference between the FT’s market price and face value? I understand why the borrower might prefer that route, but I’m still thinking through where the economic cost ultimately lands.
The range-order design also made more sense after looking at opposing curves. Could borrowing and lending orders together form something resembling a natural yield curve? If so, what determines its shape when liquidity changes?
I initially thought a two-way order might be close to market-neutral. I’m less convinced now. If demand shifts heavily toward one side, wouldn’t inventory, rate, and duration exposure still matter?
The Leverager raises another issue. Atomic execution can simplify recursive looping, but the position still has to respect MLTV and liquidation LTV. So is the real advantage lower execution complexity rather than lower leverage risk?
That distinction matters.
I’m also wondering how we should measure whether customizable curves genuinely improve capital efficiency. More flexibility can create better pricing, but it can also fragment liquidity and make markets harder to read.
At what point does customization stop helping efficiency and start creating complexity?
#termmax @TermMax