Pricing and Risk
When you request a loan quote on Amish, the pricing engine computes personalized terms based on current market conditions rather than using static lookup tables.
How quotes work
Unlike pool-based protocols that use fixed LTV tables, Amish computes risk for each quote individually. The system:
Fetches current market data (prices, volatility, liquidity depth)
Simulates thousands of possible price scenarios over your loan duration
Finds the highest LTV where loss probability stays within acceptable bounds
Calculates a competitive APR based on actual risk
Quote generation takes 8-15 seconds depending on market conditions. The tradeoff is accuracy: you receive terms based on real market conditions rather than generic parameters.
Understanding LTV
LTV (loan-to-value) is the ratio of your loan amount to your collateral value.
LTV = Loan Amount / Collateral Value
Example:
Collateral: 10 ETH at $3,000 = $30,000
Loan: $19,500 USDC
LTV: 19,500 / 30,000 = 65%Higher LTV means you borrow more against your collateral, but with less buffer before liquidation. The pricing engine finds the highest LTV where the probability of loss remains acceptable.
Your quoted LTV may differ from what you see on Aave or Compound. Those protocols use fixed per-asset LTV limits. Amish computes LTV based on:
Current volatility of your collateral
Available liquidity for liquidation
Your specific position size
Loan duration
Risk metrics
Every quote includes transparent risk metrics:
Probability of loss
The percentage of simulated scenarios where the lender loses money. If P(Loss) is 1.8%, that means in 1.8% of simulated futures, collateral value dropped enough that liquidation did not fully recover the loan.
Expected PnL
The average profit or loss across all simulated scenarios, weighted by probability. A positive E[PnL] means the loan is expected to be profitable for the lender on average.
Value at Risk (VaR 99%)
The worst-case outcome in 99% of scenarios. If VaR 99% is -$45,000, that means only 1% of simulated futures result in losses worse than $45,000.
APR determination
The quoted APR reflects actual risk plus competitive positioning:
For assets with existing money markets (ETH, WBTC, stablecoins): APR is set competitively relative to Aave rates, with a floor based on the cost of capital and risk premium.
For assets without money markets (governance tokens, long-tail assets): APR is built from components - cost of capital, risk premium based on volatility, and liquidity considerations.
APR may also adjust based on available lending capital. When capital is scarce, rates increase to attract lenders.
Why your quote differs from Aave
Aave uses fixed LTV limits per asset (e.g., 82.5% for ETH). These limits are set by governance and updated periodically.
Amish computes LTV per quote based on current conditions. In volatile markets or for large positions, your LTV may be lower than Aave's limit. In stable conditions with deep liquidity, it may approach similar levels.
The difference: Aave's fixed limits represent worst-case assumptions that remain constant. Amish quotes reflect current market reality.
Quote requests
To receive a quote, you submit a request specifying:
Collateral asset - Token you offer as collateral (e.g., WETH)
Collateral amount - How much collateral you provide
Debt asset - Token you want to borrow (e.g., USDC)
Duration - Loan term in days
The pricing engine processes the request asynchronously. Quote generation takes approximately 8-15 seconds because the system runs Monte Carlo simulation against current market data. You poll for results until the quote is ready.
The quote response includes LTV, APR, maximum loan amount, and the risk metrics described above.
Quote generation is separate from matching. The pricing engine computes terms for a given collateral and loan configuration. The matching engine identifies compatible counterparties and executes settlement. These are distinct components with different responsibilities.
Quote validity
Quotes are valid for a limited time (typically minutes) because market conditions change. If you wait too long, prices or volatility may shift enough that the original quote no longer applies.
When you proceed with a quoted loan, the terms lock at execution. Interest rates are fixed for the loan duration.
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