CVA Calculations
Provided by Rasa Capital
CVA and Max Leverage:
Note: contract parameters — maintenance margin and maxLeverage — are set by Solvers based on their own risk assessment.
The Rasa Solver has the following (basic) settings.
1) logic is as follows
CVA is the overall maintenance margin ( in case of liquidation, part goes to liquidators as incentives, part to the non-liquidated party who they needs to unwind their positions )
CVA is a fixed proportion of initial notional:
cn = CVA/Notional=CVA/(deposit*leverage)
$CVA = cn * notional (with cn fixed per market)
cn depends on the volatility and risk of the coin.
When measured as a fraction of collateral, CVA increases with leverage:
cd = CVA/deposit = cn * leverage
In order to avoid excessive trader risk, leverage is capped so that maintenance margin (CVA) does not exceed 65% of deposit.
The initial CVA in dollar terms remains unchanged as long as the position in unchanged
2) parameters are as follows
cn=CVA/notional starts from just above to 1% (1.08% for BTC and ETH), is 1.3-1.5% for blue chips (most alt and layer 2 coins), 4%-5% for exotic coins (three very risky coins require even more margin)
maxLeverage (where cd=CVA/deposit = 65%) is 60x for ETH and BTC, 40-50x for alts and layer 2 (ARB, OP), and down to 20-25 for exotic coins (3 coins have lower leverage)
Overall, each Market has a different parameters depending on its volatility and risk, with max leverage falling as risk increases, see full list in Max Leverage.
CVA and maxLLeverage Formulas:
maxLeverage is (expect for 3 coins) is in the 20-60 range
Example:
Consider a scenario where User A desires to engage in a trade with a leverage of buying a 10,000 USDT 60x BTC Long (the maximum leverage for BTC is set at 60x).
User A navigates to the SYMMIO
frontend
.Upon arrival, User A expresses an intent:
The frontend then responds with the Solvers required Maintenance Margin of:
![](https://docs.symm.io/~gitbook/image?url=https%3A%2F%2F1257875949-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FYQhBmTCs9MwhhuPQrV5v%252Fuploads%252FeGIbaTaEbXUbU22rlWYn%252Fphoto_2023-11-03_17-40-15.jpg%3Falt%3Dmedia%26token%3Dedeee92a-223d-4f84-9001-64fed9caf965&width=768&dpr=4&quality=100&sign=dd413b2c&sv=1)
The CVA (Credit Value Adjustment) for this trade is calculated as:
Should the unrealized profit and loss (uPnL) on his BTC position reach -$3500, User A will automatically be moved into the Liquidation Process by Liquidators. This example illustrates the interplay of leverage, CVA, and the liquidation threshold within the Rasa - Demo Solver environment facilitated through the SYMMIO frontend.
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