ONCHAIN COVER, RECONSIDEREDISSUER · BRIDGE · ORACLE · CUSTODY · LIQUIDITY
When everything
fails together.
The next loss may arrive through five doors at once. Price the connections before you cover the assets.
Read our investment thesis ↗ONE HYPOTHETICAL
SHARED-FAILURE EVENT60%loss severity across five exposures
SHARED-FAILURE EVENT60%loss severity across five exposures
$10,000,000 PORTFOLIO EXPOSURE−$6MThe tail is a capital event.
Illustrative stress scenario: five equal $2M exposures, each losing 60% in the same event. No historical loss or forecast is implied.
02 / THE MODEL99%
CVaR confidence level.
The question is how severe the remaining 1% can be.
THE MATHEMATICAL FOUNDATION
One incident can trigger many losses.
L = Σᵢ EᵢIᵢ
Premium = E[L] + λCVaR₀.₉₉(L) + κTailCorr(L)
- Eᵢ
- Exposure to each infrastructure risk
- Iᵢ
- Loss indicator or loss severity
- CVaR
- Mean loss in the worst 1% of simulations
- TailCorr
- Dependence of extreme failures
Make the hidden
premium visible.
Monte Carlo scenarios. Shared infrastructure failures. A comparison against independent-risk pricing on the same exposure basket.
Follow the research ↗NETWORK HORIZONBuilt around the risks