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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
XallX_{all}
and the sum of total short positions
YallY_{all}
for all trading pairs, position pool
PP
that stands for the all positions held can be illustrated as follows:
P=XallYallP=X_{all}-Y_{all}
  • XX
    is always positive,
    YY
    is always negative,
    PP
    is always positive.
The value of
PP
determines the trading depth of the system.
The larger
PP
is, the better liquidity and better risk capacity for that derivative.

Calculation

The formula of risk ratio
VratioV_{ratio}
is as follows:
Vratio=NcP=Xc+YcXallYallV_{ratio}=\dfrac{N_c}{P}=\dfrac{X_c+Y_c}{X_{all}-Y_{all}}
  • XX
    is always positive and
    YY
    is always negative.
  • The sign of
    VratioV_{ratio}
    means the direction of risk.
  • XcX_c
    and
    YcY_c
    are total long or short positions for current derivative,
    XallX_{all}
    and
    YallY_{all}
    are total long or short positions for all trading pairs.
Position pool
PP
is important to the risk control. When the value of
PP
is large enough, although
N0N\neq0
, the total risk ratio is still rather limited. When the value of
PP
is small, a normal value of
NN
will significantly increase the risk ratio.
Position mining feature is designed to increase position pool.