Risk Engine

Definition ∞ A risk engine is a computational system that evaluates and quantifies various financial or operational risks within a given framework. It processes data, applies algorithms, and generates metrics to assess potential exposures and inform decision-making. These systems are critical for managing volatility and ensuring stability in financial markets.
Context ∞ In decentralized finance (DeFi) and digital asset trading, robust risk engines are essential for managing collateralized lending, derivatives, and liquidity provision. News often discusses the sophistication of risk engines in protocols, particularly concerning liquidations and market stability during volatile periods. The accuracy and responsiveness of these systems are paramount for protecting user funds and maintaining protocol integrity.