Lodestar Finance uses its own interest rate models inspired from Compound's jump rate model. Lodestar has a total of five models with varying parameters based on the underlying risk factors of the markets.
The interest rate models assigned to different markets are classified based on the overall risk surrounding the respective underlying asset:
Interest Rate Model 1 => Minimal risk
Interest Rate Model 2 => Low risk
Interest Rate Model 3 => Medium risk
Interest Rate Model 4 => High risk
Interest Rate Model 5 => Maximum risk
In the following pages, these models will be explored and the logic behind them explained.