Interest Rate Model
The interest rate in Parallel finance is dynamically determined by the supply and demand. Therefore, the borrow and supply interests could vary in different blocks.

## 1. Exchange Rate

When a supplier deposits an asset to the money market, a certain amount of pTokens will be issued based on the initial exchange rate. The supplier earns interest through the appreciation of pToken's exchange rate.
$ExchangeRate = \frac{(TotalCash + TotalBorrows - TotalReserve)}{ TotalSupply}$

## 2. Utilization Ratio

The utilization rate represents the percentage of borrows in the total money market.
$UtilizationRatio = \frac{TotalBorrows} {TotalCash + TotalBorrows}$

## 3. Reserves

Parallel finance converts a certain portion of borrow interests into reserves. These reserves may be used for incentives, liquidation protection, emergencies, etc.
$TotalReserve_{t+1} = InterestAccumulated \cdot ReserveFactor + TotalReserve_{t}$

## 4. Borrow Interest Rate

Parallel Finance implements the jump interest model. When the utilization rate exceeds the kinks, the jump rate will be applied to the excess portion.
If Utilization <= Jump_Utilization,
$Borrow Interest Rate = Base Rate + \frac{JumpRate-BaseRate}{JumpUtilization} \cdot Utilization$
If Utilization > Jump_Utilization,
$Borrow Interest Rate = JumpRate+ \frac{FullRate-JumpRate}{1-JumpUtilization} \cdot (Utilization - JumpUtilization)$

Asset
Base_Rate
Full_Rate
Jump_Utilization
Jump_Rate
KSM
2%
30%
80%
14.01%
xKSM
1%
26.21%
80%
10%
USDT
2%
34.21%
85%
4.67%