Morpho Vault Methodology

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Introduction

The Morpho Vault Methodology provides a comprehensive framework for evaluating the risk profiles of Morpho Vaults. Morpho Vaults offer a passive lending experience, allowing users to access curated risk profiles managed by expert curators. These vaults aggregate exposures across multiple underlying markets, creating a portfolio risk structure influenced by the performance of the selected markets.

Curators play a pivotal role in configuring risk profiles, allocating assets, and adapting to market dynamics. Additionally, protective mechanisms like guardians and timelocks provide safeguards against adverse changes.

This methodology integrates these factors to deliver a robust assessment of vault risk, focusing on market exposures, curator effectiveness, and governance structures.

Key Sections

Below is an overview of the core sections covered in the methodology document:

1. Anchor Vault PSL Determination

A Vault’s Probability of Significant Loss (PSL) is calculated as the weighted average PSL of the underlying markets based on the vault’s asset allocations.

2. Modifiers

Further modifiers refine the Anchor Vault PSL to produce the Final Vault PSL and implied rating:

  • Curator Modifier: Evaluates the curator’s experience and effectiveness based on track record, assets under management and total number of pools actively managed
  • Governance Modifier: Assesses protective mechanisms within the vault’s structure, including the type of guardian mechanism and timelock duration employed by the vault

3. Final Vault Adjustment

The total vault adjustment is the sum of the notch adjustment calculated for each modifier and adjusts the Anchor Vault PSL to determine the Final PSL and rating

4. Vault Rating Scale

For Ratings on Morpho Vaults, Credora publishes a user-friendly rating scale, from A+ to D. The calculated PSL drives the rating output.

Access the Full Documentation

You can view the complete Morpho Vault Methodology on GitBook.

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