RISK ENGINE / RESERVE-AWARE CREDIT
VALUE THE EXIT.
NOT THE TICKER.
LP market value can be misleading. The valuation model uses a haircut on the physically withdrawable quote-side claim and treats the volatile token leg as zero.
01 / THE COLLATERAL FORMULA
A CONSERVATIVE
STARTING POINT.
Use the lower of eligible current and observation-window reserve measures. Apply pool-specific concentration and withdrawal constraints. This quote-side estimate is a risk model, not a guaranteed floor: selling the volatile token can drain quote reserves.
| Input | Model treatment |
|---|---|
| LP share denominator | Pool withdrawal accounting, including the pool's lp_supply semantics |
| Physical quote claim | Recognized only after ownership and withdrawal simulation checks |
| Volatile base-token leg | Zero value in the initial borrowing model |
| Virtual quote reserves | Excluded from physical collateral value |
| Stale or incomplete observations | New borrowing and collateral withdrawals blocked |
02 / MARKET RISK PARAMETERS
SMALL LIMITS.
VISIBLE FAILURE MODES.
Applied after a conservative physical-reserve observation.
On the haircut collateral value; also bounded by market caps and cash.
Accrued debt is included when evaluating health.
Subject to bounded seizure; no guaranteed profitable liquidation.
Re-evaluate health; severe insolvency needs a separately tested path.
Existing debt can exceed this through interest or withdrawals; rates respond.
Each market publishes its own parameters. Caps and collateral recognition are subject to market-specific controls.
03 / BORROWING IS A MOVING POSITION
DEBT GROWS.
RESERVES MOVE.
HEALTH CHANGES.
Interest accrues through a debt index. Utilization determines the variable rate. A shrinking quote reserve can reduce collateral value even when LP token balances are unchanged.
A health factor at or below 1 marks the model's liquidation region. Liquidation also requires valid observations and correct account state. Repayment and adding collateral should remain available during a pause.
Stress the model