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SPANDEX Risk Engine
SPANDEX is Hxro Network’s dynamic, on-chain, real-time portfolio-based risk and margin engine.
The design considerations for SPANDEX were as follows:
1. Portfolio-based margin and risk
2. Works in real-time
3. Meets the standards of CeFi incumbents
4. Robust liquidity and customer protections
You cannot run a capital-efficient marketplace on-chain without true portfolio margining, and to do that on-chain is no small feat.
Suppose you had two highly correlated positions in your portfolio – a long SOL perp and a short SOL future against it.
In an isolated risk model, you are being margined as if each position is independent of the other. In a portfolio approach (which is what SPANDEX employs). your risk is measured based on the composition of your portfolio. So in this example of having a long SOL perp and a short SOL future, you would be margined based on the spread which immediately could provide as much as 90% margin relief for the user, resulting a more efficient use of risk capital.
Another example to illustrate this point:
To capture the greatest benefits of transparency and on-chain risk and settlement, it was necessary for SPANDEX to calculate risk on every market update – a change in wallet balance, a change in mark price, time to expiration, etc. can all factor into how a portfolio’s risk is margined by SPANDEX. Any change in an input value would therefore update the user's risk health as well as the health risk of the entire network (which is also transparent).
Every wallet in the network receives the same treatment - a drastic departure from the traditional world where not all participants are given the same chance to procure discounts or rebates.