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Target Rate Policy

The Target Rate Policy implements a multi-kink auction rate curve. It extends the Morpho V2 To Morpho V2 Policy base contract.

Rate Curve​

Target policy

The rate increases linearly to a target rate, maintains that rate for a period, then increases linearly again to a maximum rate where it plateaus.

How It Works​

1. Set Policy Parameters​

The policy owner (via timelock) can configure:

  • kink1: When target rate is reached (as % of auction duration)
  • kink2: When target rate plateau ends (as % of auction duration)
  • kink3: When max rate is reached (as % of auction duration)
  • targetRate: Intermediate rate level (max 100% APR)
  • maxRate: Maximum acceptable rate (max 100% APR)
  • fee: Percentage fee charged based on duration between terms (max 100% APR)
  • feeRecipient: Address that receives fees from rolls

2. Rate Calculation​

During a roll, getRate() calculates the auction rate based on elapsed time:

  • 0% to kink1: Rate increases linearly from 0% to targetRate
  • kink1 to kink2: Rate remains at targetRate
  • kink2 to kink3: Rate increases linearly from targetRate to maxRate
  • kink3 to maturity: Rate remains at maxRate

The roller contract compares this rate with the user's maxRate and uses the lower value.

3. Fee Execution​

The policy charges fees based on the duration between source and target terms:

  • beforeRoll: Calculates fee, snapshots fee recipient balance, returns borrowedAmount = repaidDebt + feeAmount
  • afterRoll: Validates that the fee recipient received the expected fee amount