# Refinance

When a position is opened, the trader can refinance to any other supplier with more competitive offerings (e.g. lower interest rate, lower required margin) at any time. 

If the new offering requires less margin, the surplus portion from the old margin will return to the trader account balance after refinance. Also, the surplus portion is used to pay for the interest accrued for the old supplier. The figure below describes this following formula:

> Returned Margin = Old Collateral - New Collateral - Accrued Interest.

<figure><img src="/files/pcSrZJv0ngSmSeTHlzss" alt=""><figcaption><p>Trader refinances from Supplier 1 to Supplier 2 with lower collateral. The margin surplus is returned to the trader.</p></figcaption></figure>

On the other hand, if the new offering requires a higher desired price, the trader needs to pay for an additional margin. The figure below describes the following formula:

> Additional Margin = New Collateral - Old Collateral + Accrued Interest.

<figure><img src="/files/lt6Yo9chUFjNpjECnsuD" alt=""><figcaption><p>Trader refinances from Supplier 1 to Supplier 2 with higher collateral. The trader pays for the additional margin.</p></figcaption></figure>

In the dynamics of refinancing among different suppliers, the most competitive terms construct a *Pareto frontier*. The most competitive terms have either the lowest collateral or the lowest interest rate. In the figure below, rational traders only accept terms that are the most competitive and are constantly in the lookout for more competitive terms.&#x20;

<figure><img src="/files/5BptSfsoe7Am2B67dsQp" alt=""><figcaption><p>Refinance a position into more competitive terms</p></figcaption></figure>


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