Liquidity & Utilization Across Tranches
Unutilized liquidity from junior lenders cascades to senior borrowers. Interest and bad debt cascade through tranches based on supply utilization.
Liquidity
Junior Supply
The junior supply of a tranche is the cumulative sum of trancheSupplyAssets and pendingInterest for the tranche and all tranches more junior.
jrSupply[i] = Σ (trancheSupplyAssets[j] + pendingInterest[j]) for j ∈ [i, N-1]Junior supply is the liquidity that is available to the tranche ignoring borrowing activity.
Junior Borrow
The junior borrow of a tranche is the cumulative sum of trancheBorrowAssets for a tranche and all tranches more junior.
jrBorrow[i] = Σ (trancheBorrowAssets[j]) for j ∈ [i, N-1]Junior Net Supply
jrNetSupply[i] = max(0, jrSupply[i] - jrBorrow[i])
where jrBorrow[i] = Σ trancheBorrowAssets[j] for j ∈ [i, N-1]Junior Net Supply represents the amount of unutilized liquidity cascading from junior tranches.
Free Supply
The free supply is the amount of loan token that can be
borrowed from a tranche by a borrower
withdrawn from the tranche by a lender
The Free Supply is the cumulative minimum Junior Net Supply across tranches from senior to junior.
Available Supply
The available supply is the amount of liquidity that was available to this tranche before any of this tranche's borrowing.
Tranche Supply Utilization
Tranche Supply Utilization is the share of a tranche's supply assets out of the tranche's available supply
Cascading Interest and Bad Debt
Interest or bad debt generated from a borrow tranche cascades to more junior supply tranches based on trancheSupplyUtilization.
Interest Accrual
When interest is accrued, trancheBorrowInterest and pendingInterest from a tranche is paid to the current tranche lenders as well as more junior tranche lenders.
Each tranche's trancheBorrowInterest and pendingInterest contribute to the cascadingInterest
During the iteration through tranches, each tranche receives trancheSupplyUtilization share of the current cascadingInterest, and the rest cascades to more junior tranches.
Bad Debt
When bad debt is generated from a borrower, badDebt from the tranche is deducted from the current tranche lenders as well as more junior tranche lenders.
During the iteration through tranches, each tranche receives trancheSupplyUtilization share of the remaining badDebt, and the rest cascades to more junior tranches.
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