Concordia’s risk engine applies the proven methodologies securing trillions of dollars of annual volume at central counterparty clearing houses such as the CME and ICE to the real-time continuous nature of digital asset markets.
Concordia offers the next generation of collateral and risk management, with best practices drawn from TradFi, CeFi, and Defi for collateral and liquidation management.
Digital asset markets change quickly, and so must a risk engine that protects creditors. The risk engine continuously calibrates its value-at-risk calculation to the most recent volatility environment. If markets become flat, margin requirements go down. If volatility increases, the risk engine reacts in the moment to set appropriate margin requirements. The streaming dynamism of the risk engine never operates on stale data.
The risk engine answers one simple question: what is the worst case scenario a portfolio may suffer given a specific time horizon and given a specific confidence interval. The answer to this question is the value-at-risk, or margin requirement, Concordia assigns to each portfolio. The customizable API allows for different statistical confidence levels and time-horizons, with a conservative 24h at 99% being the low-risk default employed by Superposition.
Liquidations past a certain size require extra safeguards. Concordia’s risk engine scales margin requirements with the size of positions to account for jumbo portfolios that would require extra time to rebalance during turbulent market conditions. This added component allows deposits to scale, while still securing ample protection against borrower default for creditors. Concordia ensures that portfolios can be liquidated in an orderly fashion without destabilizing markets.
Every portfolio is different, with its own internal composition and balance of assets and liabilities. Our risk engine sets margin requirements based on the exact blend of instruments in each portfolio. Consequently, diversified collaterals & debts not only benefit the risk of a portfolio in theory, but in practice these portfolios enjoy more efficient haircuts.
