> For the complete documentation index, see [llms.txt](https://docs.securd.org/documentation/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.securd.org/documentation/securd-models/lp-token-rating-model/market-risk-measure-mrm.md).
# Market risk measure (MRM)
A high volatility of the underlying assets leads to high impermanent loss due to arbitrage opportunities. Thus, the rating methodology leverages on the **VaR equivalent Volatility** (VeV) in order to define the market risk measure. This metric is a volatility-like measure associated to a value at risk (VaR) and is widely used in traditional finance. In a nutshell, it corresponds to the degree of variation of the underlying assets in a stressed scenario.
Moreover, the VeV is assigned to a market risk category ranging from a scale of 1 (low risk) to 7 (high risk):
| VeV | MRM |
|---|
| < 5% | 1 |
| ≥ 5% and < 10% | 2 |
| ≥ 10% and < 15% | 3 |
| ≥ 15% and < 30% | 4 |
| ≥ 30% and < 45% | 5 |
| ≥ 45% and < 80% | 6 |
| >80% | 7 |
*Table 1: Market risk measure (MRM).*
And, each MRM corresponds to a grade as follows:
| VeV | MRM | MRM |
|---|
| Prime quality | AAA | 1 |
| High quality | AA | 2 |
| Upper medium quality | A | 3 |
| Low medium quality | BBB | 4 |
| Speculative | BB | 5 |
| Highly speculative | B | 6 |
| Ultra speculative | CCC | 7 |
*Table 2: Rating scale.*
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