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Risk Management

Risk Management: The parameters are set upon the inception of the Bear token, and changes as market Fluctuates and as the Bear manages risks.

Liquidation Price
Margin Call Price
Liquidation Safety Margin
Margin Call Safety Margin
$ 177.78
$ 140.00
77.78%
28.57%
  • Liquidation Price: The indexed price that will liquidates the Bear's margin trading account once reached. The formula for perpetual futures liquidation price are given by DEX, and are generally the same across exchanges.
    • LiquidationPrice=(AverageEntryPriceLeverage)/(Leverage1+(MaintenanceMarginLeverage)Liquidation Price = (AverageEntryPrice * Leverage) / (Leverage - 1 + (MaintenanceMargin * Leverage)
  • Margin Call Price: This is the price where all our cash are loss to the float P/L, although we are not liquidated yet, we do now want to get there and pay the fine.
    • MarginCallPrice=AverageEntryPrice+CashLeft/(NetExposure/AverageEntryPrice)MarginCallPrice = AverageEntryPrice + CashLeft / (NetExposure/AverageEntryPrice)
  • Liquidation Safety Margin: Percent move needed for Liquidation.
    • LiquidationMargin=(LiquidationPriceIndexedPrice)/IndexedPriceLiquidationMargin = (LiquidationPrice - IndexedPrice) / IndexedPrice
    • When this drops below 30%, meaning a 30% price move against us will liquidate us, we deleverage to maintain 30% safe margin.
    • When we are deleveraged, and the safe margin is above 30%, vice versa. We re-leverge to our target exposure.
  • Margin Call Safety Margin: This is the price that will trigger margin call when reached, although it won't get us liquidated, it means effectively cash left is zero after the float loss. Therefore, we enforce a mandatory deleveraging when safety margin is dropped below 15%, to the target of resetting the margin back to 15%.
    • MarginCallMargin=(MarginCallPriceIndexedPrice)/IndexedPriceMarginCallMargin = (MarginCallPrice - IndexedPrice) / IndexedPrice
Last modified 1mo ago
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