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# Paradex Risk Checks

## Order Risk Check

### Order Risk Check Conditions

An order is accepted if :

* The account meets the [Initial Margin Requirement](margin-term-reference#margin-requirement) after including the new order, i.e. $\text{Account Value}\ge\text{Account Initial Margin Requirement}$
* Including the order does not result in an increase of the Initial Margin Requirement

### Example

Setup :

* Alice has **100 USD** worth of collateral and uses Cross Margin mode
* $\text{Mark Price}_\text{ XYZ-USD-PERP}=100$

Alice successfully submits a buy XYZ-USD-PERP order of size 10

Assuming [Initial Margin Fraction](cross-margin-requirement#margin-fractions) (IMF) of 10% (i.e. a maximum leverage of 10x), the Initial Margin Requirement is : $10\%*10*100=100~\text{USD}$

Alice has no open position and therefore has an [Account Value](margin-term-reference#account-value-usd) of 100 USD. The order is then accepted since the account meets the IMR condition.

Price drop :

The Mark Price of XYZ-USD-PERP drops to 98.

$\text{Account IMR}=10\%*10*98=98~\text{USD}$

$\text{Unrealized PnL}=10*(98-100)=-20~ \text{USD}$

$\text{Account Value}=100-20=80~\text{USD} < \text{Account IMR}$

Although Alice's account value is below IMR, deleveraging check does not monitor the account since it has no open orders

Submission of an offsetting order :

Alice submits a sell order of size 5. Since this is an offsetting order which is smaller than the position size, it does not increase the [Open Size](cross-margin-requirement#open-sizes) therefore does not increase the Account IMR. The order is **accepted**.

Submission of another order that brings the total sell orders size above the position size

Later, Alice submits a new sell order of size 8. This is also an offsetting order but it does result in an increase in Alice's XYZ-USD-PERP Open Size from 10 to 13. Therefore, this order increases the account IMR. Since the account also does not meet IMR, this order is rejected.

## Health Check

Health Check is a periodic check on account's [Margin Ratio](margin-term-reference#margin-ratio). This check is done once every 5 seconds. An account passes the health check if its account value is positive and the margin ratio is below 100%.

If an account's $\text{Margin Ratio}>\text{100\%}$, the account will enter [Liquidation](liquidations).

## Withdrawal Check

The maximum amount of USDC you can withdraw is determined by your [Free Collateral Balance](margin-term-reference#free-collateral-balance-usd), but is capped by your [Account USDC Balance](margin-term-reference#account-usdc-balance). In other words, you can withdraw up to your Free Collateral Balance in USDC, but never more than the total USDC you currently have in your account.

$$
\begin{align*}
\small\text{Withdrawable USDC Amount} = \min\bigg(
& \text{Account USDC Balance}, \\
& \max\Big(0,\, \frac{\text{Free Collateral Balance}}{\text{USDC Oracle Price}}\Big)
\bigg)
\end{align*}
$$