# Theory of Cryptocurrency Interest Rates

@article{Brody2020TheoryOC, title={Theory of Cryptocurrency Interest Rates}, author={Dorje C. Brody and Lane P. Hughston and Bernhard K. Meister}, journal={SIAM J. Financial Math.}, year={2020}, volume={11}, pages={148-168} }

A term structure model in which the short rate is zero is developed as a candidate for a theory of cryptocurrency interest rates. The price processes of crypto discount bonds are worked out, along with expressions for the instantaneous forward rates and the prices of interest-rate derivatives. The model admits functional degrees of freedom that can be calibrated to the initial yield curve and other market data. Our analysis suggests that strict local martingales can be used for modelling the… Expand

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DeFi Protocols for Loanable Funds: Interest Rates, Liquidity and Market Efficiency

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This paper reviews the methodologies used to set interest rates on three prominent DeFi PLFs, namely Compound, Aave and dYdX and investigates the market efficiency and inter-connectedness between multiple protocols, examining whether Uncovered Interest Parity holds within a particular protocol and whether the interest rates for a particular token market show dependence across protocols. Expand

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