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Portfolio loss model

How market-level borrower and collateral outcomes become one vault loss distribution.

One path through the vault

Each simulation path represents one possible year for the vault. It evolves collateral values, applies asset impairment events, checks borrower liquidations, measures recovery, and adds any unpaid debt across the vault's markets.

For each funded market, the model calculates bad debt at the borrower level and weights it by the vault's supplied amount. Idle assets remain part of the vault's value. The sum becomes the vault's final loss for that path.

Asset behaviour and dependence

Each collateral asset keeps its own observed price behaviour, including ordinary variation and sudden moves. Shared market factors allow related assets to move together while preserving the behaviour measured for each asset.

Markets can also share structural dependencies such as an issuer, custodian, bridge, or redemption system. A shared failure affects every linked position in the same path.

Impairment events

Asset profiles add structural risks that price history misses, such as a loss of backing or redemption access. Each event has a stated probability, severity, and dependency group.

These events are combined with market prices, borrower leverage, price-feed behaviour, and recovery. This keeps the source of loss visible at the asset and market level.

Retained results

The formal run uses 32,000 paths and a fixed seed. The engine retains the final loss from every path and calculates all headline measures from that set.

The dashboard receives and displays the completed distribution, rating, and attribution.

Scenario analysis

Scenario families

  • Immediate permanent fall isolated price fall
  • Higher volatility baseline channels remain active
  • Mechanism failure test a specific operating failure
Outcome Depositor loss outcome
A scenario run can add an immediate collateral fall, higher price variation, or a specific operating failure to the base assessment.

A separate scenario run can examine a chosen collateral fall, higher price variation, or a specific operating failure. Each result states which input changed and reports the resulting depositor loss. The standard set covers collateral falls of 5%, 10%, 20%, and 40%, price variation at 2 times, 3 times, and 4 times, and the fall needed to reach expected losses of 1%, 5%, and 10%.

Continue with Ratings and loss metrics.