The risk ratio
is key value to risk control.
The system does not allow position changes that may lead to high risk ratio, i.e., the risk ratio
after any position changes shall be lower than the Risk Threshold
, otherwise the position change order cannot be executed.
Assuming that the risk ratio at given moment is
and the position changed is
, the risk ratio after the position change
is calculated as follows:
- is positive if the position changed is long, or negative if short.
Then the relationship between
can be described as follows:
Expand the formula:
Thus, the formula for restriction on position changed
If the position changed
failed to satisfy the formula above, the contemplated position change cannot be executed.
Position restriction ensures the risk ratio
shall always be lower than a given risk threshold.
is a changeable constant and can be adjusted via DAO community voting.
 Except for liquidation.