Risk Methodology

Learn more about how risk parameters on Euler are determined


The Euler risk framework aims to do two things:

  1. Maximise capital efficiency through borrowing and lending activity; and

  2. Minimise risk and the probability of bad debts.

To achieve this, a methodology to stress test individual assets as well as simulate a portfolio of assets in tail risk scenarios.


Ranking all available ERC20 tokens according to risk parameters:

  1. Smart Contract Risk

  2. Centralisation

  3. Volatility

  4. Liquidity

Additionally, assessing Oracle Risk

In order to arrive at:

  1. Collateral Factor

  2. Borrow Factor

  3. Cross Tier Factor

Simulate risk scenarios to maximise borrowing and lending activity and minimise bad debts

Update factors and methodology through governance

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