Risk Methodology: Introduction for Tokenised Assets in DeFi
summary
Clear methodology for tokenized assets maps LTVs to initial margin, cites BIS and ISDA SIM standardized initial‑margin rules, and reproduces examples where incentives and model error fail — AIG, LTCM, Lehman, FTX, SVB and the AVE episode where $9tn is unwound and only 35% of margin is used. Practical safeguards include separating commercial pressure from parameter setting, requiring an independent parameter setter, out‑of‑sample model tests, explicit tail scenarios, and open, verifiable risk models (ISIM + Basel 3 / FRTB implementations).
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chapters (31)
- 0:00Introduction and Risk Quant Background
- 0:40DeFi Lending as Automated Clearing
- 1:31How Lending Risk Parameters Are Set
- 2:52Three Centuries of Clearing Houses
- 3:28BIS and Standard Initial Margin Models
- 4:06Setting Haircuts for Different Assets
- 4:23Applying TradFi Models to Tokenized Assets
- 4:44When Risk Takers Mark Their Own Work
- 5:13AIG, Lehman, and Financial Failures
- 5:36How Clearing Houses Managed Lehman
- 6:07Silicon Valley Bank and DeFi Stress
- 6:39The Clearing House Default Waterfall
- 7:38How Aave Followed the BIS Model
- 7:56Fragility, Robustness, and Tail Events
- 8:18The Meaning of Antifragility
- 9:18Evaluating Proprietary Risk Models
- 9:42Why Track Record Is Not Proof
- 10:08Long-Term Capital Management Failure
- 10:48Independent Validation After 2008
- 11:38Monte Carlo Models and In-Sample Data
- 12:27Testing Models on Unseen Conditions
- 12:53Verify Instead of Trusting Models
- 14:10Questions Before Depositing in DeFi
- 15:15Commercial Pressure on LTV Settings
- 16:14High LTVs and Counterparty Conflicts
- 16:52Why Independent Parameters Matter
- 17:39Conflicts From Skin in the Game
- 17:57Scenario Analysis for Protocol Failures
- 18:24Macro Risk and Private Credit Stress
- 19:07Open Risk Methodology for Tokenized Assets
- 19:59Closing Thanks and Takeaways
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