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Quantitative Finance · Glossary

What is Venue risk?

Definition 27.3 Strategies I: Equities and Futures · Chapter 27 — Crypto Medium-Frequency Strategies

Venue risk is the risk of losing assets held at a trading venue or custodian through its failure, fraud, hacking or freezing of withdrawals; in crypto it is borne by the customer, because exchanges often hold customers’ assets themselves.

A carry book’s capital spread equally over one to eight venues, each failing independently with a 5% chance a year (assumed) and losing 80.8% of the assets on it (the FTX.com petition-time shortfall): the loss when one venue fails, the chance of at least one failure in a year, and the expected yearly loss. Data: s1_crypto.venues.
Figure 27.2. A carry book’s capital spread equally over one to eight venues, each failing independently with a 5% chance a year (assumed) and losing 80.8% of the assets on it (the FTX.com petition-time shortfall): the loss when one venue fails, the chance of at least one failure in a year, and the expected yearly loss. Data: s1_crypto.venues.
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