Supply and manage Assets

Supply and manage Assets Originators can sell Assets to an Asset Pool (referred to as True Sale in CeFi) at a discount. Note that the Protocol does not explicitly support Asset Purchase Agreement but this can be arranged off-chain between Issuer and Originator. As part of the process of creating an Asset Pool, Issuers can define an onchain risk scorecard which classifies Assets into 6 risk groups A, B, C, D, E, F depending on asset quality. The Asset Purchase Agreement could define classification criteria such as days past due of each Asset. The risk scorecard will be used to price the Assets purchased by Asset Pool (called Advance Rate) and on-going Net Asset Value Calculation (NAV Calc). Net Asset Value Calculation is based on the Discounted Cash Flow (DCF) method. DCF is used because there are no active secondary markets for loans. The Protocol uses days past due as a proxy to asset quality. Each Asset has a risk core which varies daily based on its past due status. Each risk score corresponds to a Probability of Default and Loss Given Default for the type of assets in question.

From this, Expected Loss (EL) is calculated: Expected Loss = Probability of Default x Loss Given Default Net Asset Value = Present Value of Cash Flows from Assets - Expected Loss As the Pool contract owns the Asset NFTs (LAT, AIT), it will receive any repayment relating to those Assets. Anyone (Borrower or Originator) can call to repay an Asset using its ID and the repayment amount will be routed to the Pool.