# Premium calculations

## **How exactly is the Premium calculated?**

**P\_min -** Minimum Premium (expressed in %) \
**TP\_max** **-** *Target maximum Premium when the asset is considered risky (expressed in %)* \
**UR\_risky** **-** Utilization Ratio for pricing model when the asset is considered risky (expressed in %) \
**P\_max** **-** Maximum Premium when the utilization ratio equals 100% (expressed in %) \
**UR** **-** Utilization ratio (expressed in %) \
\&#xNAN;**%P** **-** % Premium in regards to the size of the Policy\
\&#xNAN;**%P\_final** **-** final, % Premium in regards to the size of the Policy

$$
UR=\frac {Capacity+Policy:Size} {Liquidity}
$$

$$
if:UR<{UR}*{risky} \implies %P=\frac{UR}{UR*{risky}}\*TP\_{max}
$$

$$
if:UR>{UR}*{risky} \implies %P=TP*{max}+\frac{UR-UR\_{risky}}{100%-UR\_{risky}}\*(P\_{max}-TP\_{max})
$$

$$
%P\_{final}=max{{%P, P\_{min}}}
$$

$$
Annualized:Premium:Cost = Policy:Size  \* %P\_{final}
$$

## Current protocol constants

**P\_min** = 1.8% \
**TP\_max** *=* 10% \
**UR\_risky** = 85% \
**P\_max** = 30%


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