> For the complete documentation index, see [llms.txt](https://svim.gitbook.io/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://svim.gitbook.io/getting-started/liquidity-pool-features/pool-parameters.md).

# Pool parameters

When setting up an investment pool for tokenized real-world assets, various parameters must be defined to ensure the pool operates effectively and securely. These parameters govern the terms and conditions of loans, the management of collateral, and the incentives for investors. Here are the key parameters typically involved:

**Loan Amount:**

* **Definition**: The principal amount of the loan provided to the borrower.
* **Determination**: This is typically based on the value of the collateral and the borrower's creditworthiness.

**Interest Rate:**

* **Definition**: The percentage charged on the loan amount, which the borrower must pay in addition to the principal.
* **Types**: Fixed or variable rates, which can be influenced by market conditions and the risk profile of the borrower and the asset.
* **Setting**: Rates can be determined by the protocol or set through decentralized governance mechanisms.

**Investment Yield:**

* **Definition**: The return earned by investors who provide capital to the lending pool.
* **Components**: Comprised of interest payments from borrowers and any additional rewards or fees collected by the pool.
* **Influence Factors**: Dependent on the interest rate, loan terms, and overall pool performance.

**Loan Term:**

* **Definition**: The duration for which the loan is provided.
* **Options**: Short-term (weeks), medium-term (months) to long-term (years) depending on the nature of the collateral and the agreement between parties.

**Collateral Information:**

* **Definition**: Details about the asset being used as collateral for the loan.
* **Types**: Can include invoice, receivables, real estate, commodities, etc.
* **Valuation**: Accurate appraisal of the collateral's market value is essential to determine loan terms.

**Collateral Ratio:**

* **Definition**: The ratio of the loan amount to the value of the collateral (also known as Loan-to-Value (LTV) ratio).
* **Typical Ratios**: Often set conservatively, e.g., 50%-70%, to mitigate risk.

**Liquidation Clause:**

* **Definition**: Conditions under which the collateral will be liquidated to recover the loan.
* **Triggers**: Could include loan default, significant drop in collateral value, or breach of loan terms.
* **Process**: The protocol or a third-party service might handle the liquidation process.

**Loan Origination Fee:**

* **Definition**: A fee charged for processing the loan, typically a percentage of the loan amount.
* **Purpose**: Covers administrative costs and generates revenue for the protocol.

**Repayment Schedule:**

* **Definition**: The timeline and structure for loan repayment.
* **Types**: Can be monthly, quarterly, or lump sum at maturity, depending on the agreement.

**Default Penalties:**

* **Definition**: Penalties imposed if the borrower fails to meet the repayment obligations.
* **Types**: Could include additional fees, higher interest rates, or accelerated liquidation of collateral.

**Governance Mechanisms:**

* **Definition**: Rules and procedures for making decisions about the lending pool, initially by Svim Finance leadership team, in the futured managed by a decentralized autonomous organization (DAO).
* **Involvement**: Token holders can vote on key parameters, changes to the protocol, and other important decisions.


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