# Credits

### Collateral Credit

A Collateral Credit determines how much credit is gained from collateralizing an asset. The collateral credit is derived from the collateral factor which depends on the volatility of an asset. The higher volatility of an asset, the lower the collateral factor. 

$$
\begin{align\*}
\text{TotalCollCredit} =& \text{ LPValue} \cdot \text{LPCollFactor} \ &+ \sum \text{ExtraCollTokenValue} \cdot \text{ExtraCollTokenCollFactor}
\end{align\*}
$$

Stella uses the concept of LP token as collateral to enable undercollateralized loans. Thus, the LP collateral credit comes from the minimum collateral credit within the asset pair.

For example, $1 worth of ETH has 0.8 collateral credit while $1 worth of DAI has 0.95 collateral credit as ETH is considered a higher-volatile asset. Moreover, when performing leveraged yield farming on the ETH-DAI asset pair, 0.8 (the lower of 2 values) will be used as collateral factor.

{% content-ref url="/pages/pe9Nlg2dJOFkkbwPOkyf" %}
[Collateral Factor](/stella-doc/stella-yield/stella-strategy/collateral-factor.md)
{% endcontent-ref %}

### Borrow Credit

A Borrow Credit determines how much credit is consumed from borrowing an asset. The borrow credit is derived from the borrow factor which depends on the volatility of an asset. The higher volatility of an asset, the higher the borrow factor.

$$
\text{BorrowCredit} = \text{TotalDebtValue} \cdot \text{BorrowFactor}
$$

$$
\text{TotalBorrowCredit} = \sum\_i \text{BorrowCredit}*{\text{BorrowedAsset}*\text{i}}
$$

For example, $1 worth of ETH has 1.14 borrow credit while $1 worth of DAI has 1.05 collateral credit as ETH is considered a higher-volatile asset.

{% content-ref url="/pages/P80lbuwyi2s5WungFTky" %}
[Borrow Factor](/stella-doc/stella-yield/stella-strategy/borrow-factor.md)
{% endcontent-ref %}


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