Risk grades
Each market carries a letter from A to F. It grades the market, not a position: the letter is the weakest of a small set of pillars, and each pillar is earned by something we measured.
What the letter describes
Whether the price the market liquidates against has held, whether the market is deep enough to enter and to leave, how its borrowing cost has behaved, and how much recorded history those answers stand on. It never looks at leverage or at a health factor. You choose those, and the letter does not change with your choice.
The pillars
- oracle depeg
- A pair that is meant to hold a peg is graded on its worst recorded fall. A pair whose price floats, such as ether against a dollar stablecoin, is not graded on its moves, because how much of a move a position can take is the health factor you set. This pillar also checks that the oracle contract exists, that the price is read rather than assumed, how old a heartbeat feed was when we last read it, and how far the oracle sat from the market price.
- liquidity
- How much can be borrowed now, against the size of a reference position. For a leverage market, what selling the collateral to leave would cost at that size. And any bad debt the venue reports. Thin depth can hold a grade down but never makes it F; bad debt can.
- rate
- A leverage market is graded on how often its borrow rate passed the point where the loop stops paying, tested at the most leverage the venue allows, which is the worst case for any health factor you could choose. A borrow market is graded on how far its rate jumps above its usual level on its worst days.
- data history
- How many days of price and borrow rate history the other pillars stand on. A short record holds the grade down but never makes it F: missing evidence is not a measured hazard.
How the letter is chosen
Each check earns a letter against a threshold written down before any market was graded with it. A pillar takes the letter of its weakest check, and the market takes the letter of its weakest pillar. One weak pillar is enough, so an A means every pillar that could be measured earned an A.
The Risk tab says which pillar limits the grade, and names each of them when more than one sits at the same letter. When a single check holds the grade down, it also shows what that check would need for the grade to rise.
What was not measured
A check that could not be measured does not count toward the letter in either direction. It is still listed, with the reason, and the tab says how many checks were measured. A read that failed is stated as a failed read, never shown as an empty result.
What sits beside the grade
Some facts are stated without being graded. The largest supplier withdrawing is described as a scenario, because nothing measured says it will happen. The price, borrow rate and liquidation histories each have their own tab on the market page, and the Risk tab links to them rather than repeating them.
What a grade does not tell you
A grade is a summary of what was measured. It is not a forecast, and it says nothing about the leverage you choose. A market with a good letter can still liquidate a position opened close to its limit. When this market's own history would have liquidated a position at the leverage in view, the Risk tab says so above the letter.