> ## Documentation Index
> Fetch the complete documentation index at: https://docs-staging.centuari.finance/llms.txt
> Use this file to discover all available pages before exploring further.

# RWA Risk Parameters

> Risk framework and parameters for tokenized real-world asset collateral

## Overview

RWA collateral introduces unique risks compared to crypto-native assets. This document explains how Centuari's risk parameters account for these factors.

## Risk Framework

### Risk Categories

<CardGroup cols={2}>
  <Card title="Market Risk" icon="chart-line">
    Price volatility of underlying assets
  </Card>

  <Card title="Liquidity Risk" icon="droplet">
    Ability to liquidate positions quickly
  </Card>

  <Card title="Custody Risk" icon="vault">
    Security of underlying asset storage
  </Card>

  <Card title="Oracle Risk" icon="database">
    Price feed accuracy and availability
  </Card>

  <Card title="Issuer Risk" icon="building">
    Creditworthiness of token issuer
  </Card>

  <Card title="Regulatory Risk" icon="scale-balanced">
    Legal status and compliance
  </Card>
</CardGroup>

## Parameter Methodology

### LTV Calculation

Base LTV is determined by:

```
Base LTV = 90% - Volatility Adjustment - Liquidity Adjustment - Issuer Adjustment
```

| Factor           | Adjustment Range |
| ---------------- | ---------------- |
| Volatility (30d) | 0-20%            |
| Liquidity Score  | 0-10%            |
| Issuer Rating    | 0-10%            |

**Example: AAPL.t**

```
Base: 90%
Volatility (20%): -15%
Liquidity (High): -5%
Issuer (A-rated): -5%
Final LTV: 65%
```

### Liquidation Threshold

```
Liquidation Threshold = LTV + Safety Buffer
```

Safety buffer typically 8-12%, depending on asset class.

## Asset Class Parameters

### Equities

<Tabs>
  <Tab title="Blue Chip">
    **Characteristics**:

    * Market cap > \$100B
    * High trading volume
    * Established companies

    | Parameter             | Value                         |
    | --------------------- | ----------------------------- |
    | LTV                   | 65%                           |
    | Liquidation Threshold | 75%                           |
    | Liquidation Penalty   | 8%                            |
    | Trading Hours Buffer  | +5% LTV reduction after hours |
  </Tab>

  <Tab title="Growth">
    **Characteristics**:

    * Higher volatility
    * Lower predictability
    * Tech-heavy

    | Parameter             | Value                         |
    | --------------------- | ----------------------------- |
    | LTV                   | 60%                           |
    | Liquidation Threshold | 70%                           |
    | Liquidation Penalty   | 10%                           |
    | Trading Hours Buffer  | +8% LTV reduction after hours |
  </Tab>

  <Tab title="ETFs">
    **Characteristics**:

    * Diversified exposure
    * Lower individual stock risk
    * Varies by composition

    | Parameter             | Value                         |
    | --------------------- | ----------------------------- |
    | LTV                   | 65-70%                        |
    | Liquidation Threshold | 73-78%                        |
    | Liquidation Penalty   | 7%                            |
    | Trading Hours Buffer  | +5% LTV reduction after hours |
  </Tab>
</Tabs>

### Fixed Income

<Tabs>
  <Tab title="US Treasuries">
    **Characteristics**:

    * Lowest credit risk
    * Low volatility
    * Highest LTV

    | Parameter             | Value                 |
    | --------------------- | --------------------- |
    | LTV                   | 85%                   |
    | Liquidation Threshold | 92%                   |
    | Liquidation Penalty   | 3%                    |
    | Trading Hours Buffer  | None (low volatility) |
  </Tab>

  <Tab title="Investment Grade">
    **Characteristics**:

    * BBB or higher rated
    * Moderate spread risk
    * Good liquidity

    | Parameter             | Value |
    | --------------------- | ----- |
    | LTV                   | 75%   |
    | Liquidation Threshold | 82%   |
    | Liquidation Penalty   | 5%    |
    | Trading Hours Buffer  | +2%   |
  </Tab>

  <Tab title="High Yield">
    **Characteristics**:

    * Below BBB rated
    * Higher spread volatility
    * Credit event risk

    | Parameter             | Value |
    | --------------------- | ----- |
    | LTV                   | 65%   |
    | Liquidation Threshold | 73%   |
    | Liquidation Penalty   | 8%    |
    | Trading Hours Buffer  | +5%   |
  </Tab>
</Tabs>

### Commodities

<Tabs>
  <Tab title="Gold">
    **Characteristics**:

    * Safe haven asset
    * 23h/day trading
    * High liquidity

    | Parameter             | Value |
    | --------------------- | ----- |
    | LTV                   | 70%   |
    | Liquidation Threshold | 78%   |
    | Liquidation Penalty   | 5%    |
    | Weekend Buffer        | +3%   |
  </Tab>

  <Tab title="Silver">
    **Characteristics**:

    * Higher volatility than gold
    * Industrial demand component
    * More volatile

    | Parameter             | Value |
    | --------------------- | ----- |
    | LTV                   | 60%   |
    | Liquidation Threshold | 70%   |
    | Liquidation Penalty   | 8%    |
    | Weekend Buffer        | +5%   |
  </Tab>
</Tabs>

## Trading Hours Impact

Traditional markets have limited hours, creating price uncertainty during closures.

### Market Hours

| Market        | Hours (ET)                | Days      |
| ------------- | ------------------------- | --------- |
| US Equities   | 9:30 AM - 4:00 PM         | Mon-Fri   |
| Gold/Silver   | 6:00 PM Sun - 5:00 PM Fri | Near 24/7 |
| US Treasuries | 8:00 AM - 5:00 PM         | Mon-Fri   |

### After-Hours Protocol

<Steps>
  <Step title="Market Close">
    Last traded price recorded
  </Step>

  <Step title="Buffer Applied">
    LTV reduced by asset-specific buffer
    (e.g., 65% → 60% for stocks after hours)
  </Step>

  <Step title="Overnight">
    New borrows use reduced LTV
    Liquidations use buffered price
  </Step>

  <Step title="Market Open">
    Price updates, normal LTV restored
  </Step>
</Steps>

### Weekend Handling

| Scenario     | Handling                                 |
| ------------ | ---------------------------------------- |
| Friday Close | LTV buffer increases (stocks: +10%)      |
| Weekend News | Positions monitored, liquidations paused |
| Monday Open  | Gap risk assessed, liquidations resume   |
| Flash Crash  | Circuit breakers activate                |

## Liquidation Process

### Standard Liquidation

<Steps>
  <Step title="Health Factor < 1">
    Position becomes liquidatable
  </Step>

  <Step title="Liquidator Action">
    Liquidator repays portion of debt
  </Step>

  <Step title="Collateral Seized">
    Liquidator receives collateral + penalty
  </Step>

  <Step title="On-Chain Sale">
    Liquidator sells RWA token on DEX
  </Step>
</Steps>

### RWA-Specific Considerations

<Warning>
  RWA tokens may have lower on-chain liquidity than crypto assets. Liquidations may take longer or have higher slippage.
</Warning>

**Mitigations**:

* Higher liquidation penalties incentivize quick liquidation
* Protocol reserve fund covers bad debt from slippage
* Liquidation auctions for large positions

### Liquidation Penalties

| Asset Class      | Penalty | Rationale                          |
| ---------------- | ------- | ---------------------------------- |
| US Treasuries    | 3%      | Highly liquid, low risk            |
| Gold             | 5%      | Good liquidity                     |
| Blue Chip Stocks | 8%      | Moderate on-chain liquidity        |
| Growth Stocks    | 10%     | Lower liquidity, higher volatility |
| High Yield Bonds | 8%      | Credit risk premium                |

## Oracle Configuration

### Primary: Chainlink

| Asset Type | Update Frequency | Deviation Threshold |
| ---------- | ---------------- | ------------------- |
| Equities   | 24 hours or 1%   | 1%                  |
| Gold       | 1 hour or 0.5%   | 0.5%                |
| Treasuries | 24 hours or 0.1% | 0.1%                |

### Fallback: TWAP

If Chainlink fails:

* 15-minute TWAP from DEX prices
* Requires minimum \$100k liquidity in pool
* Automatic switch, no manual intervention

### Stale Price Handling

| Condition                        | Action                                 |
| -------------------------------- | -------------------------------------- |
| Price stale > 2 hours (equities) | New borrows paused                     |
| Price stale > 4 hours (gold)     | New borrows paused                     |
| Price stale > 24 hours           | Liquidations paused, governance review |

## Issuer Risk Assessment

Each RWA token issuer is evaluated:

### Rating Framework

| Factor            | Weight | Metrics                      |
| ----------------- | ------ | ---------------------------- |
| Regulatory Status | 30%    | Licenses, compliance         |
| Custody Quality   | 25%    | Custodian rating, insurance  |
| Track Record      | 20%    | Operating history, incidents |
| Transparency      | 15%    | Audit frequency, reporting   |
| Financial Health  | 10%    | Capital, profitability       |

### Current Issuer Ratings

| Issuer | Rating | Notes                               |
| ------ | ------ | ----------------------------------- |
| Backed | A      | Swiss regulated, clear custody      |
| Ondo   | A      | US regulated, institutional custody |
| Paxos  | A+     | NYDFS regulated, long track record  |

### Issuer Monitoring

<Info>
  Protocol continuously monitors issuer health and can adjust parameters or pause assets if concerns arise.
</Info>

Triggers for review:

* Audit delays or qualifications
* Regulatory actions
* Custody incidents
* Significant redemptions
* Price feed anomalies

## Stress Testing

### Historical Scenarios

| Scenario          | Impact            | Protocol Response                |
| ----------------- | ----------------- | -------------------------------- |
| March 2020 Crash  | Stocks -34%       | All positions healthy at 65% LTV |
| 2022 Bond Selloff | TLT -30%          | Positions healthy at 78% LTV     |
| Gold Flash Crash  | Gold -5% intraday | No liquidations triggered        |

### Hypothetical Scenarios

| Scenario        | Assumption          | Result                             |
| --------------- | ------------------- | ---------------------------------- |
| 50% Stock Crash | AAPL -50% overnight | 23% of positions liquidatable      |
| Issuer Default  | Backed insolvent    | Protocol insurance covers gap      |
| Oracle Failure  | 48h stale price     | Liquidations paused, manual review |

## Parameter Changes

Parameters can be adjusted through governance:

<Steps>
  <Step title="Proposal">
    Community or risk team proposes change with rationale
  </Step>

  <Step title="Analysis">
    Risk team models impact on existing positions
  </Step>

  <Step title="Vote">
    Token holders vote (typically 3-day period)
  </Step>

  <Step title="Timelock">
    24-48 hour delay before implementation
  </Step>

  <Step title="Implementation">
    Parameters updated on-chain
  </Step>
</Steps>

<Card title="View Current Parameters" icon="sliders" href="https://app-staging.centuari.finance/parameters">
  See live risk parameters for all assets
</Card>