Risk Management & Trading Framework

PropBlock's AI capabilities:

1. Predictive Safeguards vs reactive measures

2. Property-Specific Scoring vs generic collateral factors

3. Rental Yield Derivatives unique to real estate RWAs

1. Risk Mitigation Architecture

1.1 Core Safeguards

A[Asset-Level Checks] --> B[Protocol-Wide Buffers]
B --> C[User Protection Tools]

1.2 Key Components

Component	Description	AI Enhancement
PVE Shield	Predictive Valuation Engine monitors 50+ market signals	Flags overvalued assets pre-listing
Liquidity Backstop	2.5% protocol treasury reserve	AI-driven rebalancing triggers
Collateral Health	125% minimum collateral ratio	Auto-lock excess during volatility
Circuit Breakers	15-min trading halts if >20% price swing	ML predicts stress scenarios

2. Trading Mechanism

2.1 AI-Optimized Markets

Dynamic Pricing Model

def calculate_price(prop_score):
    base_value = AI_Valuation_Model(prop_score)
    liquidity_factor = (1 + (pool_depth / 10**6)) 
    return base_value * liquidity_factor * (1 + risk_premium)

2.2 Order Types

Type	Execution	Use Case
AI-Suggested LIMIT	Matches predicted fair value	Long-term investors
VOLATILITY STOP	Triggers at 2σ price movement	Risk-averse traders
RENTAL YIELD SWAP	Hedge against occupancy changes	Portfolio managers

3. Risk Parameters

3.1 Property Risk Scoring (PRS™)

Formula:

PRS = (DebtRatio × 0.3) + (LocationScore × 0.4) + (AI_Volatility × 0.3)

3.2 Liquidity Management

• Depth Protection:

require(
    poolBalance >= minLiquidity[assetClass], 
    "Insufficient depth for safe trading"
);

4. Insurance Mechanisms

4.1 Protection Vault

Coverage Stack:

Layer	Coverage	Trigger
1	90% principal	Smart contract failure
2	60% value	Catastrophic market event
3	30% yield	Extended vacancy periods

4.2 AI-Powered Underwriting

Claim Prediction Model:

def risk_premium_calc(property):
    return (maintenance_history * 0.2 + 
            tenant_quality_score * 0.3 +
            natural_disaster_risk * 0.5)

5. Governance Controls

5.1 Parameter Adjustment Process

sequenceDiagram
    AI_Oracle->>DAO: Risk Parameter Suggestions
    DAO->>Voters: Snapshot Proposal
    Voters->>Smart_Contract: 72hr Voting
    Smart_Contract->>Protocol: Automatic Implementation

5.2 Emergency Protocols

• Multi-Sig Recovery: 5/8 signers required for:

  • Oracle override

  • Treasury withdrawals

  • Global settlement