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Asset risk and recovery

How collateral backing, liquidity, and recovery routes affect loss after liquidation.

Assess the economic claim

A collateral token can represent a direct asset, reserves, a staked position, a strategy share, a principal token, or a share in another vault. The assessment records what backs the token and how a holder can turn it into the asset needed to repay the loan.

The asset profile covers redemption and withdrawal rules, settlement time, fees, capacity, access, pause controls, and important dependencies. These details determine both the chance of impairment and the value that can be recovered during liquidation.

Two routes to recovery

From seized collateral to the loan asset

  1. Seized collateral The liquidator holds the borrower's collateral and needs the loan asset back.
    The model picks the best complete route the liquidator could actually use.
  2. Supported recovery route A sale on an exchange, or the asset's own redemption, withdrawal, or settlement process. Only routes with verified evidence are used.
    That route is then tested at the real transaction size, not at a quoted headline price.
  3. Route constraints Every route charges fees, has limited capacity, takes time, and may restrict who can use it. These are measured at the size the liquidator actually needs to move.
    After fees, delay, and capacity limits, the model records how much loan asset comes back.
  4. Loan-asset recovery What is left in the loan asset after the route's costs. This is what repays the market's lenders.
Seized collateral follows a supported recovery route. Fees, capacity, delay, and access conditions determine how much of the market's loan asset can repay lenders.

Market recovery sells seized collateral through an exchange or aggregator. The model uses observed quotes at stated sizes and times.

Mechanism recovery uses the asset's own redemption, withdrawal, or settlement process, followed by any sale needed to reach the loan asset. Each step carries its fee, delay, capacity, and access rules.

The model can choose the better complete route available to the liquidator. Shared capacity is counted once across routes that use the same pool of liquidity.

Being unable to exit is not the same as losing value

Cork keeps three answers apart, and shows each of them separately.

Permanent loss is value that is gone against the asset's own reference at the one-year horizon.

Time to get out is how long a redemption, withdrawal or settlement takes to complete. A pause, a queue or a waiting period is a restriction on access. On its own it is not a loss.

Executable capacity is how much can actually be sold or redeemed, at a stated discount and within a stated period, all the way through to the vault's own loan asset. A route that stops short of the loan asset is not a completed exit, and an unverified merchant or completion time is recorded as a named constraint rather than treated as a same-day cash exit.

Delay becomes loss only through a stated path: a holder is forced to sell into a worse price, or the value is still unrecovered at the horizon. That path runs through the vault simulation, so an asset that is fully backed but slow to exit can still cost a lending vault money — without Cork inventing any extra chance of the asset itself failing.

Where a finding affects only how quickly a holder gets out, the asset page records it against recovery and exit, and not against the chance of permanent loss. The same finding is never counted in both places.

Recovery at the right size

Recovery is measured at the amount of collateral expected from each borrower group. Debt and seized collateral keep their own asset units throughout the calculation. This allows a dollar loan secured by ether to be tested against an ether sale or redemption route at the correct size.

Quoted liquidity is used within its observed range. Larger amounts require further evidence or a stated recovery assumption.

Special case: principal-token collateral

A principal token settles into an underlying asset at maturity. Before maturity, recovery can use secondary-market liquidity or hold the token to settlement when the timing and financing are supported. The underlying asset's own impairment risk remains part of the assessment.

Asset-level risk contribution

Allocation shows how much of the vault is exposed to an asset. Loss contribution shows how much that position adds to expected loss in the model. The dashboard presents both because a large allocation with strong recovery can contribute less risk than a smaller position with weak recovery.

Continue with Borrowers and liquidation.