Exercise 3: Risk Assessment and Position Management

⏰ Time Investment: 45-60 minutes 🎯 Goal: Build your risk assessment framework and emergency procedures

📚 Required Reading Integration 📖 Primary: Lesson 3: Risk Management Fundamentals 📖 Supporting: Lesson 2: The Mathematics of Lending and Borrowing

⚠️ Phase 1: Risk Identification (15 minutes)

Position Risk Assessment

Your Position:

• Collateral: 10 ETH @ $2,000 = $20,000

• Borrowed: $12,000 USDC

• Liquidation Threshold: 85%

• Health Factor: 1.42

Exercise 1: Complete risk assessment

Risk Factor	Assessment	Mitigation
Health Factor	_____ (Safe/Warning/Danger)	_____
Collateral Volatility	_____ (Low/Med/High)	_____
Liquidation Risk	_____ (Low/Med/High)	_____
Interest Accrual	_____	_____

Things to Avoid Checklist

Exercise 2: Review your position against "things to avoid":

• Using E-Mode without understanding

• Borrowing at maximum LTV

• Ignoring Health Factor

• Not having exit plan

• Using volatile collateral without buffer

Action items: _________________________________

Risk Assessment Template

🛡️ Phase 2: Safety Buffer Calculation (15 minutes)

Buffer Analysis

Exercise 3: Calculate safety buffer

• Current debt ratio: _____%

• Liquidation threshold: _____%

• Safety buffer: _____%

Exercise 4: How much can ETH drop before danger zone?

• Current HF: 1.42

• Danger zone: HF < 1.3

• Price drop tolerance: _____%

Emergency Procedures

Exercise 5: Create your exit plan

If HF drops below 1.3:

1. Immediate action: _________________________________

2. Amount to add/repay: _________________________________

3. Backup plan: _________________________________

📊 Phase 3: Position Monitoring Setup (15 minutes)

Alert Configuration

Exercise 6: Set up monitoring plan

• Health Factor alert threshold: _____

• Price alert threshold: _____% drop in 24h

• Check frequency: _____ (daily/weekly)

• Tools to use: _________________________________

Risk Dashboard

Exercise 7: Create tracking template

Metric	Current	Target	Status
Health Factor	_____	> 2.0	_____
Collateral Value	$_____	$_____	_____
Debt Amount	$_____	< $_____	_____

Monitoring Setup Checklist

✅ Self-Assessment

• Risk identification: __/5

• Safety buffer understanding: __/5

• Emergency procedures: __/5

Next steps: _________________________________

---

← Back to Summary | Next: Exercise 4 →