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Risk Engine

mrgnlend’s risk engine estimates three main components to determine acceptable risk constraints:
  • Liquidator execution capacity: The risk engine estimates how fast liquidators can execute liquidations. This speed, or execution capacity, is primarily determined by constraints that originate from the liquidator side.
  • Market depth: The risk engine conservatively assumes liquidators will only continue liquidations under profitable circumstances. Price impact data is used to understand the maximum capacity liquidators are capable of offlaying into the market while remaining profitable relative to mrgnlend’s liquidator discount, which is fixed at 2.5%.
  • Market depth recovery time: Given a market depth and a significant buy from / sell into the market, market depth will imbalance and need time to recover to typical levels. The risk engine conservatively estimates the amount of time it takes for market depth to recover.