Individual Creditline

Fixed Term Instrument

Another straightforward example would be a creditline instrument that facilitates unsecured lending or loans collateralized with any collateral(long tail assets, NFTs, etc). Borrowers who meet the approval criterion will be able to drawdown from this custom creditline.

A utilizer would be a borrower, a longZCB would represent a zero coupon bond, a shortZCB would represent a credit default swap, and managers would represent credit/collateral underwriters.VT holders would represent passive investors who have invested in a senior tranche of a bundle of individual loans, but through the AMM they would have the option to hedge a loan they deem too risky, or be more exposed to a loan they deem less risky.

During the duration of the loan, LPs can also buy shortZCB if they a) decide that the borrower is too risky and b) find a counterparty willing to buy longZCB

Assessment

During assessment, as the loan is fixed term fixed rate, managers will be able to buy longZCB at a price less than 1 and redeem it at 1 at maturity. In cases where the borrower makes a prepayment, redemption prices would be set such that the generated yields are simply socialized by all longZCB holders.

How does this relate to a Conditional LendingPool(CLP)? In CLPs, a borrower would be able to take a loan out instantly from the pool, if one of the pools in the protocol supports the collateral/condition of the borrower or the borrower's loan principal is under a threshold. If else, the borrower would have to propose an individual creditline where the managers will assess and buy longZCB on a case-by-case basis