Closed Rubilmax closed 11 months ago
I'd like to note that I don't think we should think about absolute of rates, because I don't think we are able to tell how the market would react to a rate of 1 or 10bps, depending on assets & volume involved
So I think the most relevant thing is to think about order of magnitude changes in rates
It seems to me that under such extreme & illiquid market conditions, having to wait 10 days (with c = 1.5 or 2) before increasing the order of magnitude of the rate is a bit too much, so only taking this into account, I'd recommend c = 4 or even 6 (but it has other implications)
EDIT: oh! I just found out that 4 corresponds to the value used in tests!
Let's suppose the worst case scenario of a market not utilized for so long that the rate reached
MIN_RATE_AT_TARGET
and suddenly it is utilized 100%So
err = 1
becauseutilization = 100%
And we can calculate that: $r{t+1} = c \times min{rate} \times e^{adjSpeed \times elapsed}$
Which leads $elapsed = ln(\frac{r{t+1}}{c \times min{rate}}) \times \frac{1}{adjSpeed}$
Let's now plot $elapsed$ (in days) based on different values of $r_{t+1}$ and $c$: