ADL

Auto-deleveraging (ADL) is the last line of defense employed by the risk engine to protect the solvency of markets. It kicks in when a position cannot be closed above the bankruptcy price and the insurance fund is insufficient to cover the capital shortfall. On Bluefin, a permissioned ADL worker automatically deleverages bankrupt positions against top-of-queue positions from the opposite side. The ADL queue prioritizes closing the most profitable and high-leverage traders to reduce counterparty risk.

ADL Queue

The objective of the ADL queue is to pick out accounts with the highest PnL percentage and leverage. For each market, $i$ be the individual position for which the ADL Score is calculated.

$\text{PNL Score}_i = \begin{cases} \frac{ P_{index/oracle}-P_{pos} }{P_{pos}} \quad &\text{if Long}, \\\ \frac{-( P_{index/oracle}-P_{pos}) }{P_{pos}} \quad &\text{if Short}.\end{cases}$

$\text{PNL Score}_i = \max (0, \text{PNL Score}_i)$

$\text{Leverage Score}_i = 1/\text{max}(\text{MMR},\text{MR})$

$\text{ADL Score}_i = \text{PNL Score}_i \times \text{Leverage Score}_i$

$\text{ADL Quantile} = rank(user.\text{ADL Score}_i)/\text{Total User Count}$

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Last updated 8 months ago

ADL Queue

The objective of the ADL queue is to pick out accounts with the highest PnL percentage and leverage. For each market,

i

be the individual position for which the ADL Score is calculated.

\text{PNL Score}_i = \begin{cases} \frac{ P_{index/oracle}-P_{pos} }{P_{pos}} \quad &\text{if Long}, \\\ \frac{-( P_{index/oracle}-P_{pos}) }{P_{pos}} \quad &\text{if Short}.\end{cases}

\text{PNL Score}_i = \max (0, \text{PNL Score}_i)

\text{Leverage Score}_i = 1/\text{max}(\text{MMR},\text{MR})

\text{ADL Score}_i = \text{PNL Score}_i \times \text{Leverage Score}_i

\text{ADL Quantile} = rank(user.\text{ADL Score}_i)/\text{Total User Count}