Credit Evaluation

The X-Margin Credit Evaluation is composed of three categories: Due Diligence, Financials, and Risk Monitoring. The resulting X-Margin Credit Score is a single number out of 1000, and it can be converted to a letter rating. X-Margin adjusts the categories and weightings depending on the amount of information provided, and makes the completeness transparent for consumers of the Credit Score.

The category weights are displayed as point totals. By default if a borrower provides all information, the categories are weighted as follows: Due Diligence [175], Financials [400], Risk Monitoring [425]. Each category is made up of factors, and their default weightings are displayed throughout this document.

Dynamic Weighting adjusts certain factors if Risk Monitoring or other information is not provided. For example, absent Risk Monitoring X-Margin increases the reliance on Due Diligence [210] and Financials [690]. Equity and Liability components are captured periodically from Financials, while the risk evaluation considers Return Profile, Risk Adjusted Return Profile, Debt Servicing, and Maximum Drawdown. The Visible Liquidity factor remains and encourages the provision of real-time data, which is superior for ongoing evaluation.

Additionally, using the Credit Score as a primary input, X-Margin calculates a Borrow Capacity for each trading firm. The Borrow Capacity calculation uses the Credit Score to define a target Portfolio Leverage, and subsequently calculates a USD Borrow Capacity based on trading firm current Liability and Portfolio Equity.

Borrow Capacity provides clear guidance for lenders and DeFi protocols, and it protects sensitive trading firm information from being publicly available. Using the X-Margin platform, trading firms are always capable of displaying more granular Credit Evaluation information bilaterally.