Maximum Leverage

Maximum Leverage (RLmax) sets the upper limit on the leverage that the strategy can safely employ. It is defined such that there is only a 1% probability that an adverse price movement, occurring without any rebalancing, will breach the critical liquidation threshold. This parameter is crucial in preventing excessive risk and potential liquidation.

Technical Details:

• Adverse Price Movement: The calculation is based on the 99th percentile of a 15-minute price change distribution, denoted as $Q(15m)_{0.99}$

• Leverage Formula: RLmax is determined by comparing the current price to a critical threshold PMTPM_TPMT​ adjusted by the extreme price movement: $RLmax = L\left(\frac{PM_T}{1 + Q(15m)_{0.99}}\right)$ where L(p) denotes the leverage at price p.

• Purpose: This parameter ensures that even in the case of severe market moves, the system’s leverage remains within a safe boundary, thereby limiting the liquidation risks.