> For the complete documentation index, see [llms.txt](https://risk.infinity.exchange/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://risk.infinity.exchange/risk-matrix/market-risk/fx-risk.md). # FX Risk The main unit of account is USD. This means that each position that comprises your NAV (cash + present value of assets and liabilities) is valued in USD. Based on the [eligible collateral](https://faq.infinity.exchange/deposits-and-withdrawals/eligible-collateral) in your Trading Account, you are subject to foreign exchange (denoted as, "FX") risk (e.g. you holding a borrowing ETH position, priced as ETH/USD, where the price of ETH goes up, the present value of your liability in USD terms goes up, assuming no change in ETH interest rate). For example, if you are in a: * Lending position, you would be long the FX risk, i.e. long the token/USD pair * Borrowing position, you would be short the FX risk, i.e. short the token/USD pair A simple example on why a borrowing position is short the FX risk is where you have stablecoin(s) (e.g. USDC) in your Trading Account and created a ETH borrowing position (e.g. 10 ETH). * As the price of [ETH/USD](https://pyth.network/price-feeds/crypto-eth-usd) goes up (e.g. from 1,800 to 2,000), the amount of ETH you owe would increase in USD terms, or put another way - the amount of ETH your USDC could purchase, under a liquidation scenario, decreases as the price of ETH/USD increases * Separately, since USDC is a stablecoin, its price relative to USD ([USDC/USD](https://pyth.network/price-feeds/crypto-usdc-usd)) may fluctuate greater or less than 1. In the event of a depeg (where the USDC/USD price deviates materially away from 1), you would be subject to an additional FX risk, since, in the case of a depeg downwards, the USD value decreases as the price of USDC drops below 1 * Put together, if the price of ETH goes up and the price of USDC goes down, in USD terms, you would be negatively affected by FX risk in both ways * Note: under the Portfolio Margin approach, Infinity's risk framework would take into account all of the tokens comprising your NAV Mechanically, let’s take the example of holding a fixed rate lending position in ETH. * PV(**USD**) denotes the present value of your ETH fixed rate lending position, in **USD** terms * PV(**ETH**) denotes the present value of your ETH fixed rate lending position, in **ETH** terms $$ PV\_{USD}=\sum\_{i} B\_{USD}(0,i)\times CF\_{USD,i}\\=\sum\_{i} \frac{1}{{(1+r\_{USD}(0,i))^i}}\times CF\_{ETH,i}\times FX(0)\times \frac{(1+r\_{USD}(0,i))^i}{{(1+r\_{ETH}(0,i))^i}}\\=\sum\_{i} \frac{1}{{(1+r\_{ETH}(0,i))^i}}\times CF\_{ETH,i} \times FX(0)=PV\_{ETH} \times FX(0) $$ In the formula above, PV(USD) is a function of spot FX (ETH/USD) and PV(ETH), the latter shown as *r(ETH)*. Note: *r(USD)* does not intervene here and therefore, there is no sensitivity to the interest rate differential between USD and ETH, or put another way - no sensitivity to FX forwards **=> All FX exposure are treated as spot FX exposure. There is no exposure to FX forwards.** Under My Risk Positions, in the Risk Overview page, a breakdown of the present value of your net positions are shown, either in local currency (e.g. ETH = ETH, or ETH in USD terms), grouped by contract or period (e.g. month, quarter, semi-annual, annual). For example, the below graph would be "PV By Monthly". * To calculate your net position delta in USD, you would divide the figures by 100. In the 1M bucket, if the ETH/USD price goes up +1 bps, your PV would decrease by $(28), while your in aggregate you are up $4,257. | Monthly | WBTC | ETH | USDT | USDC | DAI | | ------- | --------- | ----------- | ----------- | ----------- | ----------- | | 1M | 0 | (2,831) | 0 | 5,000 | 4,563 | | 2M | 1 | 1 | 0 | 500,000 | 50 | | 3M | (0) | 0 | 10 | 8,418 | 5,000 | | 4M | 896 | 5,000 | 0 | 0 | 50 | | 5M | 50 | 1 | 500 | 5,000 | 5,000 | | 6M | 0 | 500 | 500,000 | 5 | (0) | | 7M | 0 | 0 | 1 | 0 | 5,000 | | 8M | 5 | 50 | 1 | (58,131) | 1 | | 9M | 0 | 1 | 5,000 | 50 | 0 | | 10M | 1 | (77,538) | (1,182) | 5 | 5 | | 11M | 5,000 | 500 | 0 | 50 | 1 | | 12M | 500 | 500,000 | 0 | 50 | 500,000 | | Sum | **6,452** | **425,682** | **504,329** | **460,447** | **519,669** | --- # Agent Instructions This documentation is published with GitBook. GitBook is the documentation platform designed so that both humans and AI agents can read, navigate, and reason over technical content effectively. 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