Borrow Rate Perpetuals

This perpetual contract is designed to replicate the cumulative borrowing cost of a reference Aave variable-rate loan, allowing traders to hedge interest rate risk or speculate on DeFi borrow conditions.

Characteristic	Description
What it Tracks	The cumulative interest accrual of a variable-rate loan on Aave, represented by a Borrow Multiplier Index.
Index Definition	A Borrow Multiplier Index, Jt, that grows based on the instantaneous Aave borrow rate, rt. It is defined as: $J_t = \exp\left(\int_0^t \frac{r_s}{Y} ds\right)$ where Y is the number of seconds in a year. This index represents the total growth factor of a loan's principal due to interest.
Oracle Type	A 24/7 on-chain oracle that reads the live variable borrow rate for a given asset directly from the Aave v2/v3 protocol pools or uses a smoothed nowcast of this rate.
Market Type	Cash-Settled Index Perpetual.
PnL Formula	The PnL for a position with notional N is designed to perfectly match the interest accrued on an Aave loan of the same initial notional. The infinitesimal PnL is given by PnLt = NdJt. Over a period [0, T], the total PnL is: • PNL (Long) = N x (JT - 1) • PNL (Short) = N x (1 - JT) Where: • N: The USD notional value of your position. • JT: The value of the Borrow Multiplier Index at the end of the period.
Use Cases	Hedging (Long): • Borrowers on Aave can take a long position of the same notional value to perfectly neutralize the variable interest cost of their loan. Directional Trades: • Go long to speculate on rising Aave borrow rates (e.g., during periods of high utilization). • Go short to speculate on falling Aave borrow rates. Arbitrage: • Trade the spread between Aave borrow costs and funding rates on other perpetual exchanges.
Users	• DeFi Borrowers & Lenders • Relative-Value & Arbitrage Funds • Macro Traders speculating on on-chain rates • DAOs managing treasury debt
Vol-stat (σ)	Low-to-Medium. Aave borrow rates are generally less volatile than crypto asset prices but can experience sharp spikes during periods of high market stress and borrowing demand.
Margin Numbers	Derived from the Max Leverage tiers. For the initial leverage tier, the Initial Margin (IM) is a percentage of the notional position value (e.g., 33.3% for 3x leverage).

See additional market mechanics and parameters