Computing the Premium and Updating State

The PRF and LRF are then combined to provide the Premium. Both the PRF and LRF are defined in terms of a percentage of the Book to be debited, levied from the Book. Thus the global premium is charged in the asset currency:

PREMIUM CUMULATIVE INDEX

The premium delta is divided by the current Taker total premium rate to give us a premium per unit premium rate:

An individual Taker premium is then computed by multiplying their cumulative index interval by their individual PremiumRate.

BOOK AND LIABILITY

YIELD TARGET

The Yield Target E is incremented as a function of the Yield Factor, 𝜀, multiplied by the Debt, each time a new premium is computed.

The Yield Factor is selected to develop a market-competitive expected Yield as informed by modelling. It is applied to the Yield Target each time the Premium is calculated such that we develop, on average, an expectation of Market Yield, 𝜀'. E may be considered as similar to the Book, Liability and the Debt in that it is a type of liability, but one that is not payable at all times.

We increase E from D rather than a risk-weighted value so that the distribution of Maker risk ratings does not impact total premium. E is treated as a capital liability, and is present in the capital liquidity ratios which are an input into the premium, thus, ceteris paribus, has the effect of drawing USD into the Capital Pool over time.