Paradex Risk Guardian

Synthesizes data from multiple Paradex MCP tools into a unified risk picture.

Answers the question: "Am I safe?" with specific numbers and actionable recommendations.

Available MCP Tools (data sources)

Risk Assessment Framework

1. Account Health Check

Pull paradex_vault_account_summary and compute:

• Margin utilization: used_margin / total_equity × 100%
• <50%: Healthy (green)
• 50-75%: Caution (yellow)
• 75-90%: Warning (orange)
• >90%: Danger — liquidation risk (red)

• Free margin: total_equity - used_margin — how much capacity for new positions

• Liquidation buffer: estimate distance to liquidation as a percentage price move
• For each position: how much can the market move against you before maintenance margin is breached?
• Report the tightest (most dangerous) position

2. Position Analysis

Pull paradex_vault_positions and analyze:

Concentration risk:

• Calculate notional value of each position
• Compute percentage of total exposure per market
• Flag if any single position is >40% of total exposure
• Flag if top 2 positions are >70% of total exposure

Directional bias:

• Sum net delta across all positions
• Report as: "Net long $X notional" or "Net short $X notional"
• Compare net exposure to account equity for effective leverage

Unrealized P&L:

• Total unrealized P&L across all positions
• Unrealized P&L as percentage of equity
• Identify worst-performing position (biggest drag)
• Identify best-performing position

3. Funding Cost Analysis

For each open position, estimate funding cost:

1. Get current funding rate from paradex_market_summaries
2. Calculate 24h funding cost: position_notional × funding_rate × (24 / funding_period_hours)
3. Annualize: daily_cost × 365
4. Sum across all positions for total portfolio funding cost/income

Report:

• Total daily funding cost/income
• Per-position funding breakdown
• Flag positions where funding is >0.1% daily (costly to hold)

4. Liquidity Risk

For each position, check exit liquidity via paradex_orderbook:

• Can the full position be exited within 1% slippage?
• What percentage of the position could be exited at current depth?
• Flag illiquid positions where orderbook depth < 50% of position size within 2%

5. Stress Testing (Scenario Analysis)

Run simple what-if scenarios:

Price shock scenarios:

• -5% across all markets: estimate portfolio P&L impact
• -10% across all markets: estimate P&L + check if margin call triggered
• -20% across all markets: extreme scenario

Calculation for each scenario:

For each position: position_size × price_change × direction_multiplier

Sum to get portfolio impact, subtract from equity, check against maintenance margin.

Correlation stress:

If user holds multiple crypto positions, note that crypto assets are highly correlated.

A -10% BTC move often means -12 to -20% in alts. Apply asset-specific beta adjustments:

• BTC: 1.0x
• ETH: ~1.2x
• Alts: ~1.5-2.0x

6. Daily P&L Attribution

Break down the day's P&L into components:

• Trading P&L: unrealized P&L changes from position mark-to-market
• Funding P&L: funding payments received or paid
• Fee P&L: trading fees incurred (if data available)
• Net P&L: sum of above

Risk Score

Compute an overall risk score (1-10) based on:

Weighted sum → Risk Score 1-10

Output Format

Quick Risk Check

## Risk Check — [Account/Vault]

🟢/🟡/🟠/🔴 **Risk Score: X/10**

| Metric | Value | Status |
|---|---|---|
| Margin Used | X% | 🟢/🟡/🟠/🔴 |
| Free Margin | $X | — |
| Net Exposure | $X (Xx leverage) | 🟢/🟡/🟠/🔴 |
| Largest Position | MARKET (X% of exposure) | 🟢/🟡 |
| Unrealized P&L | $X (X% of equity) | — |
| Daily Funding Cost | $X | — |
| Tightest Liquidation | MARKET @ $X (X% away) | 🟢/🟡/🟠/🔴 |

### Recommendations
- [specific, actionable items if risk is elevated]

Full Risk Report

## Full Risk Report — [Account/Vault]

### Account Overview
[equity, margin, free capital]

### Position Breakdown
[table of all positions with notional, direction, P&L, liquidation distance]

### Concentration Analysis
[exposure distribution chart/table]

### Funding Analysis
[per-position funding costs, net daily cost]

### Stress Test Results
[scenario table: -5%, -10%, -20% impact]

### Liquidity Assessment
[exit capacity per position]

### Recommendations
[prioritized list of risk-reducing actions]

Safety Principles

• When risk score is ≥7, lead the response with the risk warning before any other analysis
• Never suggest increasing position size when margin utilization is >60%
• Always note that liquidation estimates are approximate — actual liquidation depends on

mark price which can differ from last traded price

• Stress test results assume instantaneous price moves — real liquidations can cascade
• This is risk analysis, not financial advice
• Recommend the user verify critical numbers on the Paradex UI before acting

See margin-model.md for detailed Paradex margin formulas and risk scoring methodology.