Perps Risk Framework

The Perps Risk Framework is employed by Mars protocol for estimating risk parameters in perps markets.

The primary goal is to ensure sufficient margin and safeguards against extreme losses, price manipulation, and excessive market imbalances.

Margin Requirements: Maximum Leverage, Maximum LTV, Liquidation LTV are determined using the extreme-loss approach and CVaR risk metric based on historical price data. Leverage caps are applied according to asset quality categories.
Market Impact Model Parameter: SkewScale is calculated based on global market depth to ensure attractive trading when the market is balanced.
Open Interest Limits: Maximum Open Interest (MaxOI) and Maximum Skew are determined through multiple approaches: Extreme Price Change, Manipulation Scenario, and Expert Caps, with consideration for vault TVL.
Funding Rate Model Parameters: MaxFundingVelocity is calculated to incentivize traders to close positions when the skew is high and prevent extreme price changes from generating profits beyond what funding payments would offset.
Trading Fees: Maker and taker fees are established based on competitor analysis.

Calculations are primarily based on historical price data, global market depth, and vault TVL.
Conservative assumptions, such as static skew and worst-case scenarios, are often used in calculations.
Risk parameters are typically updated every three months but can be urgently updated based on risk alerts, such as substantial TVL decreases or withdrawals.
Special cases are considered for new assets with limited data history.

The framework aims to balance risk management and capital efficiency, ensuring the long-term sustainability of Mars protocol's perp markets.

All risk parameters are calculated off-chain and approved through the proposals for Risk DAO.

Last updated 4 days ago

The Perps Risk Framework is employed by Mars protocol for estimating risk parameters in perps markets.

The primary goal is to ensure sufficient margin and safeguards against extreme losses, price manipulation, and excessive market imbalances.

Margin Requirements: Maximum Leverage, Maximum LTV, Liquidation LTV are determined using the extreme-loss approach and CVaR risk metric based on historical price data. Leverage caps are applied according to asset quality categories.
Market Impact Model Parameter: SkewScale is calculated based on global market depth to ensure attractive trading when the market is balanced.
Open Interest Limits: Maximum Open Interest (MaxOI) and Maximum Skew are determined through multiple approaches: Extreme Price Change, Manipulation Scenario, and Expert Caps, with consideration for vault TVL.
Funding Rate Model Parameters: MaxFundingVelocity is calculated to incentivize traders to close positions when the skew is high and prevent extreme price changes from generating profits beyond what funding payments would offset.
Trading Fees: Maker and taker fees are established based on competitor analysis.

Calculations are primarily based on historical price data, global market depth, and vault TVL.
Conservative assumptions, such as static skew and worst-case scenarios, are often used in calculations.
Risk parameters are typically updated every three months but can be urgently updated based on risk alerts, such as substantial TVL decreases or withdrawals.
Special cases are considered for new assets with limited data history.

The framework aims to balance risk management and capital efficiency, ensuring the long-term sustainability of Mars protocol's perp markets.

All risk parameters are calculated off-chain and approved through the proposals for Risk DAO.

Last updated 4 days ago