# Risk Ratio

The risk ratio marks the relative risk of the hAMM system.

## Position Pool

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.

## Calculation

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.