Decentralized Risk Score

Probability of Profitability

The probability of profitability(PoP) is a new metric that can be generated by RAMM's prediction market. Whenever a manager buys longZCB, the amount he buys relative to his budget determines his confidence level; his subjective probability of the event that an instrument is profitable. Managers' subjective probability can be aggregated to compute a crowd's PoP.

A higher PoP is a necessity for an instrument to be approved. It also serves as a quantitative tool that informs the vault's passive investors of the amount of risk they are taking when investing in the vault.

More information and derivation can be found in the whitepaper.