Impact of Collateralization Ratios on APRs

In both the single and dual asset borrow models of market neutral yield farming, we are required to deposit collateral in order to borrow assets against that collateral. The Loan-to-Value (LTV) ratio will impact the net APR or Return on Capital for the end user. A higher LTV ratio will result in more capital being borrowed and deployed into the yield farm, and therefore higher returns. A lower LTV will result in less capital being borrowed and deployed into the yield farm, and therefore lower returns.

We have historically viewed ~50% LTV ratio as being reasonable to use; however, at BoF’s discretion, it is possible via our admin panels to alter the LTV ratio.