Price Fluctuation

How the exchange rate between paired assets in a lending market is evaluated, covering volatility, correlation, and expected price evolution.

Price fluctuation is one of four criteria in Steakhouse Financial's Market Rating layer. It measures the exchange rate stability between paired assets in a lending market, including volatility, correlation, and expected price evolution.

The Price Fluctuation criterion is different from price volatility, as it reflects the exchange rate between the two assets of a market. It includes price volatility but also the correlation between the loan asset and the collateral asset in a money market, as well as their expected price evolution. For a stablecoin, it describes how its reserve assets are correlated with the represented value of the token.

The LLTV parameter, described in the next section, mitigates Price Fluctuation risk and improves its rating.

Indicators:

• Assets are pegged or interchangeable

• Strong correlation between assets, reserve assets or loan assets

• Substantial probability of economic risk loss due to high-amplitude movement in exchange rate (native crypto asset vs dollar)