April 2026
Intermediate
288 pages
9h 2m
English
Content preview from Financial Mathematics for Cryptocurrencies
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CHAPTER 6Carry and Storage
6.1 LENDING AND MARGIN
There are two main ways lending can be observed in the DeFi space: conventional loan agreements and margin trading.
Conventional lending and borrowing involves a borrower paying interest in exchange for cryptocurrency assets. One specificity of DeFi is that the lending rates are often quoted in hours, alongside the more conventional annual equivalent. Most of the time, the loans are collateralized and can offer leverage up to 5×. In the context of lending and borrowing, this is often quoted as a loan-to-value (LTV) ratio, which is the ratio of the value of the loan to the value of the collateral. To illustrate, a 5× leverage1 means that the LTV is 80%. Loan contract terms, such as maturity, are set in advance, and borrowers can ...
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