Risk-Weighted Exposure

Risk-weighted exposure is a method of calculating the total risk of a portfolio by assigning different weightings to various assets based on their volatility and correlation. Instead of treating all positions as equal, the system adjusts the margin requirement based on the inherent risk of the underlying asset.

For example, a stablecoin position might have a lower risk weight than a highly volatile altcoin. This approach ensures that capital is allocated more efficiently, reflecting the true risk profile of the trader.

It is a cornerstone of advanced portfolio netting logic, allowing for more precise margin calculations. By understanding the sensitivity of each asset to market shocks, the system can better predict potential losses.

This methodology is essential for managing diverse portfolios in crypto-native financial derivatives. It balances the need for security with the desire for capital efficiency.