The spread

Rava publishes one reference number per market, read off the chain. It carries two parts. The spread, what the lending pays over a Treasury, and the realized loss, what holders actually lost. Maple, Steakhouse, Gauntlet, and Pareto are live today.

How the spread is read

Take the average loan rate, value weighted by size, and subtract the risk free rate. What is left is the spread, what these borrowers pay over a Treasury for the chance the lending takes a loss.

It is read off the chain, not set by Rava. The spread is the rate the curator underwrote each loan at. If the loans repriced higher, the spread would move with them.

Perpetual and continuous

The number is not a dated series. It is recomputed from the latest loan rates every block as the credit reprices. Losses settle from the on chain loss feed against whoever holds the short token at the loss block.

The spread and the market price

There are two numbers. The reference is the average loan yield minus the risk free rate, built from on chain data, where the curator underwrote the spread. The market price is the cost the short side actually trades at on the pool. The gap between them, and its direction, is the read on the underwriting.

• Market price above the reference. The market prices the credit as riskier than it was underwritten. A wide enough gap wakes the determination panel.
• Market price below the reference. The market prices it as safer than it was underwritten.

The realized loss

The realized loss is the share of lent dollars not recovered after a loss event: a borrower default, a collateral shortfall, or a liquidation that gaps. The loss record sits alongside it, including past cycles. Loan classification is not yet verified, so the segment behind the number is a working draft.