Definition ∞ A Risk Metric is a quantitative measure used to assess and monitor potential losses or adverse outcomes associated with an investment, asset, or financial activity. It provides a numerical representation of exposure to various types of financial or operational hazards. These metrics assist in evaluating the safety and stability of positions or protocols. They are fundamental tools for decision-making.
Context ∞ In digital asset markets, risk metrics are crucial for investors and protocols to evaluate the volatility, liquidity, and overall exposure of various cryptocurrencies and DeFi positions. Metrics like Value at Risk (VaR), impermanent loss, or smart contract audit scores help users and platforms make informed decisions. The development of more sophisticated and accurate risk metrics remains an active area of research within the industry.
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