# Risk Ratio

The

**risk ratio**marks the relative risk of the hAMM system.At any moment, given the sum of total long positions

$X_{all}$

and the sum of total short positions $Y_{all}$

for all trading pairs, **position pool**$P$

that stands for the all positions held can be illustrated as follows:$P=X_{all}-Y_{all}$

- $X$
*is always positive,*$Y$*is always negative,*$P$*is always positive.*

The value of

$P$

determines the **trading depth**of the system.The larger

$P$

is, the better liquidity and better risk capacity for that derivative.The formula of

**risk ratio**$V_{ratio}$

is as follows:$V_{ratio}=\dfrac{N_c}{P}=\dfrac{X_c+Y_c}{X_{all}-Y_{all}}$

- $X$
*is always positive and*$Y$*is always negative.* *The sign of*$V_{ratio}$*means the direction of risk.***$X_c$*and*$Y_c$*are total long or short positions for current derivative,*$X_{all}$*and*$Y_{all}$*are total long or short positions for all trading pairs.*

Position pool

$P$

is important to the risk control. When the value of $P$

is large enough, although $N\neq0$

, the total risk ratio is still rather limited. When the value of $P$

is small, a normal value of $N$

will significantly increase the risk ratio.Position mining feature is designed to

**increase position pool**.Last modified 1yr ago