# Maintenance Margin (CVA) Calculations

{% hint style="info" %}
**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.**&#x20;

***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:&#x20;

&#x20;           *cn = CVA/Notional=CVA/(deposit\*leverage)*

&#x20;           *$CVA = cn \* notional (with cn fixed per market)*

&#x20;     cn depends on the volatility and risk of the coin.&#x20;

* When measured as a fraction of collateral, CVA increases with leverage:

&#x20;            *cd = CVA/deposit = cn \* leverage*

* In order to avoid excessive trader risk,  leverage is capped so that maintenance margin (CVA) does not exceed 60% 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 = 60%) 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](https://docs.symm.io/solver-documentation/solver-settings/max-leverage "mention").\ <br>
{% endhint %}

## CVA and maxLeverage Formulas:

$$
maxLev= 60%/ ($CVA/notional) = 60%/ cn
$$

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).

1. **User A navigates to the** [**SYMMIO `frontend`.**](https://www.symm.io/frontends)
2. **Upon arrival, User A expresses an intent:**

```
Tade Size: 10,000 USDT 
Leverage: 60x, 
Notional value: 600,000 USDT. 
Price: $34,676.1 per BTC, 
Size: 17.31 BTC.
```

3. **The frontend then responds with the Solvers required Maintenance Margin of:**

```
CVA: 6499.84 USDT
```

<figure><img src="https://1257875949-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FYQhBmTCs9MwhhuPQrV5v%2Fuploads%2FeGIbaTaEbXUbU22rlWYn%2Fphoto_2023-11-03_17-40-15.jpg?alt=media&#x26;token=edeee92a-223d-4f84-9001-64fed9caf965" alt="" width="365"><figcaption></figcaption></figure>

#### The CVA (Credit Value Adjustment) for this trade is calculated as:&#x20;

$$
CVA=10,000×0.60
\= 6000USDT
$$

{% hint style="danger" %}
Should the unrealized profit and loss (uPnL) on his BTC position reach -$4000, 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 through a SYMMIO frontend.
{% endhint %}

## Integration with API endpoints

Solver endpoints provide real-time parameters for collateral requirements via a REST API. See Rasa's endpoints [here](https://docs.symm.io/solver-documentation/solver-settings/broken-reference).

#### **Endpoint Structure**

```bash
GET /get_locked_params/{symbol}?leverage={leverage}
```

**Example**:

```bash
https://base-hedger82.rasa.capital/get_locked_params/BTCUSDT?leverage=60
```

The endpoint returns the following response:

```json
{
  "cva": "40",       // CVA (% of deposit)
  "lf": "20",        // Liquidation Fee (% of deposit)
  "leverage": "60.0", // Allowed leverage
  "partyAmm": "40",  // Party A’s initial margin (% of deposit)
  "partyBmm": "0"    // Party B’s initial margin (0 for single-sided)
}
```

***

### **2. Deriving `cn` (CVA/Notional Ratio)**

`cn` represents the **total Maintenance Margin (CVA + LF)** as a percentage of the **notional value**. The cn is ultimately defined by the solver. This should reflect the risk of the asset.

#### **Formula**

$$
cn = \frac{\text{cva} + \text{lf}}{100 \times \text{leverage}}
$$

#### **Example Calculation**

Using the API response for BTCUSDT:

```json
{
  "cva": "40",       // CVA (% of deposit)
  "lf": "20",        // Liquidation Fee (% of deposit)
  "leverage": "60.0", // Allowed leverage
  "partyAmm": "40",  // Party A’s initial margin (% of deposit)
  "partyBmm": "0"    // Party B’s initial margin (0 for single-sided)
}
```

* `cva = 40%`, `lf = 20%`, `leverage = 60x`
* Deposit = 100 USDT (for illustration).

$$
cn = \frac{40 + 20}{100 \times 60} = \frac{60}{6,000} = 0.01
$$

***

### **3. Calculating Maintenance Margin**

The Maintenance Margin can derived from `cn` and the **notional value**.

#### **Formula**

$$
\text{Maintenance Margin} = cn \times \text{Notional}
$$

#### **Example**

* **Notional** = Deposit × Leverage = 100USDT × 60 = 6,000 USDT
* **`cn`** = 1% (from above).

$$
\text{Maintenance Margin} = 0.01 \times 6,000 = 60 \text{USDT}
$$

***

### **4. Calculating Max Leverage**

The maximum allowed leverage (`maxLeverage`) is determined by the **CVA/Deposit cap** (`cd ≤ 60%`) and `cn`.

{% hint style="info" %}
With higher `cn` the `maxLeverage` must decrease proportionally
{% endhint %}

#### **Formula**

$$
\text{maxLeverage} = \frac{0.6}{cn}
$$

#### **Example**

For BTCUSDT with `cn = 1%`:

$$
\text{maxLeverage} = \frac{0.6}{0.01} = 60x
$$

**Example Scenarios**:

| Asset Type         | `cn` | Max Leverage          |
| ------------------ | ---- | --------------------- |
| **BTC/ETH**        | 1%   | ( 0.6 / 0.01 = 60x )  |
| **Blue-Chip Alts** | 1.5% | ( 0.6 / 0.015 = 40x ) |
| **Exotic Coins**   | 4%   | ( 0.6 / 0.04 = 15x )  |

The [contract-symbols](https://docs.symm.io/api-endpoints-and-deployments/solver-addresses-and-endpoints/rasa-capital#get-contract-symbols) endpoint should return this maxLeverage as a parameter in the endpoint.

Example for Rasa BTCUSDT:

```json
{
      "price_precision": 1,
      "quantity_precision": 3,
      "name": "BTCUSDT",
      "symbol": "BTC",
      "asset": "USDT",
      "symbol_id": 1,
      "is_valid": true,
      "min_acceptable_quote_value": 120,
      "min_acceptable_portion_lf": "0.003000000000000000",
      "trading_fee": "0.000600000000000000",
      "max_leverage": 60,
      "max_notional_value": 2100000,
      "rfq_allowed": true,
      "hedger_fee_open": "0.0006",
      "hedger_fee_close": "0.0006",
      "max_funding_rate": "200",
      "min_notional_value": "100",
      "max_quantity": "1000",
      "lot_size": "0"
    },
```
