A Scientific Risk Limit System for A Crypto Futures
The below insightful new article penned by KuCoin’s founder, Michael Gan, and Head of Derivatives, Ken Tian, delves into the innovative backend logic of KuCoin’s new risk limit system for cross-margin, similar to traditional finance, showcasing KuCoin’s commitment to technical excellence and robust risk management strategies.
Introduction
Many cryptocurrency exchanges adopt complex risk management measures to prevent liquidation risks. These include setting multi-level risk limits and restricting the use of high leverage. Additionally, exchanges dynamically adjust parameters like risk limits and margin rates based on the underlying asset’s price and market liquidity. However, these processes are not only complex but also lack clear management standards, requiring significant resources to maintain a system that may not be internally consistent—for example, increasing capital may not allow for larger positions due to abrupt changes in leverage tiers.
On some trading platforms (see Figure 1), there are nearly a hundred risk limit tiers. These passive tier changes increase the complexity of system management and can result in partial forced liquidation, undermining …
The post A Scientific Risk Limit System for A Crypto Futures appeared first on Coin Edition.
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A Scientific Risk Limit System for A Crypto Futures
The below insightful new article penned by KuCoin’s founder, Michael Gan, and Head of Derivatives, Ken Tian, delves into the innovative backend logic of KuCoin’s new risk limit system for cross-margin, similar to traditional finance, showcasing KuCoin’s commitment to technical excellence and robust risk management strategies.
Introduction
Many cryptocurrency exchanges adopt complex risk management measures to prevent liquidation risks. These include setting multi-level risk limits and restricting the use of high leverage. Additionally, exchanges dynamically adjust parameters like risk limits and margin rates based on the underlying asset’s price and market liquidity. However, these processes are not only complex but also lack clear management standards, requiring significant resources to maintain a system that may not be internally consistent—for example, increasing capital may not allow for larger positions due to abrupt changes in leverage tiers.
On some trading platforms (see Figure 1), there are nearly a hundred risk limit tiers. These passive tier changes increase the complexity of system management and can result in partial forced liquidation, undermining …
The post A Scientific Risk Limit System for A Crypto Futures appeared first on Coin Edition.
Read More
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