Required Value denotes a predetermined minimum quantitative threshold or qualitative criterion that an asset, collateral, or operational parameter must meet within a financial or crypto system. Its purpose is to maintain systemic solvency, ensure compliance with protocol rules, or uphold the integrity of a financial position.
Mechanism
The operational mechanism for a required value often involves automated monitoring systems and smart contract logic that continuously assess the current state of an asset or parameter against the defined threshold. Should the value fall below this requirement, pre-programmed actions, such as margin calls, liquidations, or system alerts, are triggered to restore equilibrium or mitigate risk.
Methodology
The strategic methodology for establishing and enforcing required values centers on risk management and maintaining system stability. This framework includes robust quantitative modeling to determine appropriate thresholds, rigorous stress testing of protocol parameters, and designing transparent enforcement mechanisms to protect participants and ensure the long-term viability of collateralized lending, options trading, or other financial primitives in crypto.
Tri-party models offer automated, value-based collateral management by an agent, while third-party models require manual, asset-specific instruction by the pledgor.
We use cookies to personalize content and marketing, and to analyze our traffic. This helps us maintain the quality of our free resources. manage your preferences below.
Detailed Cookie Preferences
This helps support our free resources through personalized marketing efforts and promotions.
Analytics cookies help us understand how visitors interact with our website, improving user experience and website performance.
Personalization cookies enable us to customize the content and features of our site based on your interactions, offering a more tailored experience.
