Curve Market Health Scores Methodology
The LlamaRisk scoring methodology for assessing crvUSD mint and lend markets' health
Summary
This report thoroughly explains the methodology powering our quantitative Market Health Scores, a scoring framework for identifying the health of DeFi lending and stablecoin CDP markets and relative market risk associated with the underlying collateral. An initial implementation of the LlamaRisk Market Health Scores has been done for Curve's crvUSD mint markets, with plans to expand to LlamaLend markets soon.
Market Health Scores are an aggregation of several risk categories, each involving a quantitative evaluation of the target market's dynamics and the properties of the underlying collateral. Ultimately, our goal is to encompass all relevant factors in determining a market's health in a single score that can then be displayed on market UI pages to inform users of risks in the most direct way possible. This document will explain the evaluation process for each health category.
The Market Health Scores Risk Portal may also be a useful tool for protocols looking to integrate with LlamaLend markets and understand their risk. The relevant input data and derived scores for each category should be independently verifiable to ensure comprehensibility and build confidence in the significance of the final score. Therefore, a breakdown of each category and all relevant data is made available for each Market Health Score on a dedicated LlamaRisk Risk Portal page.