DeFi Liquidation Risk Modeling Using Geometric Brownian Motion
Fuente:
arXiv
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| Autori principali: | , |
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| Natura: | Preprint |
| Pubblicazione: |
2025
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| _version_ | 1866909825017839616 |
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| author | Belenko, Timofei Vosorov, Georgii |
| author_facet | Belenko, Timofei Vosorov, Georgii |
| contents | In this paper, we propose an analytical method to compute the collateral liquidation probability in decentralized finance (DeFi) stablecoin single-collateral lending. Our approach models the collateral exchange rate as a zero-drift geometric Brownian motion, and derives the probability of it crossing the liquidation threshold. Unlike most existing methods that rely on computationally intensive simulations such as Monte Carlo, our formula provides a lightweight, exact solution. This advancement offers a more efficient alternative for risk assessment in DeFi platforms. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2505_08100 |
| institution | arXiv |
| publishDate | 2025 |
| record_format | arxiv |
| spellingShingle | DeFi Liquidation Risk Modeling Using Geometric Brownian Motion Belenko, Timofei Vosorov, Georgii Risk Management Computational Finance Mathematical Finance In this paper, we propose an analytical method to compute the collateral liquidation probability in decentralized finance (DeFi) stablecoin single-collateral lending. Our approach models the collateral exchange rate as a zero-drift geometric Brownian motion, and derives the probability of it crossing the liquidation threshold. Unlike most existing methods that rely on computationally intensive simulations such as Monte Carlo, our formula provides a lightweight, exact solution. This advancement offers a more efficient alternative for risk assessment in DeFi platforms. |
| title | DeFi Liquidation Risk Modeling Using Geometric Brownian Motion |
| topic | Risk Management Computational Finance Mathematical Finance |
| url | https://arxiv.org/abs/2505.08100 |