# The Automated Market Maker

The AMM (Milton) is a dynamic pricing mechanism that offers quotes to users of the protocol for pay fixed rates (receive floating) or receive fixed rates (pay floating). The AMM takes the current IPOR rate at the time of quote and adds a spread taking into account a trailing moving average, the size of the trade, the risk exposure of the pool, current volatility, and reversion to the mean.

**How is the Spread Calculated?** 

The IPOR Protocol is tuned to replicate the industry-standard methods to price interest rate swaps and apply them to the blockchain environment. The following criteria are computed to come up with the fair market price for the swap:

1. Volatility
2. Recent trend
3. Demand
4. Maturity
5. Direction (long or short)

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