Collateralization Rate & Composition Gap

To balance the collateral portfolio, the system adjusts the Collateralization Rate based on deviations from target weights.

Target weight (w*): Desired share of each asset.
Current weight (w): Actual deposits by users.
Composition Gap = Difference between the two.

When the gap is large:

Collateralization rate increases.
Effective loan-to-value (LTV) decreases.
APY for that asset adjusts downward.

This nudges users to deposit underrepresented assets, keeping the portfolio balanced.

Formula


ρeX =
   ρmin                                         if w = 0 or w = 100%
   ρmin + (ρImax – ρmin) * ((w* – w) / w*)      if 0 < w ≤ w*
   ρmin + (ρIImax – ρmin) * ((w – w*) / (100% – w*))   if w* < w ≤ 100%