Portfolio Risk Scoring

Portfolio Risk Scoring is the process of evaluating the aggregate risk of a trader's account by considering the correlation between different assets and positions. A sophisticated margin engine does not just look at individual positions but analyzes how they move in relation to one another.

For example, if a trader holds two long positions that are highly correlated, the risk is higher than if they held offsetting positions. The score determines the overall margin requirement and the proximity to liquidation.

This allows the protocol to be more lenient with hedged portfolios while being stricter with concentrated risks. It is an application of quantitative finance that improves both capital efficiency and system safety.