> For the complete documentation index, see [llms.txt](https://docs.concordia.systems/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.concordia.systems/future-roadmap/concentration-risk.md). # Concentration Risk Concentration risk is another facet that needs to be added to DeFi risk models. Traditional exchanges look at the liquidity of instruments in a portfolio to limit exposure to heavily concentrated or illiquid assets. The idea of prominent concentrated positions adding more risk is relatively simple. Bigger positions and less liquid assets can cause price impact, making it harder to liquidate safely, which can cause bad debt. Concentration Charge works similarly to those seen in the trad-fi markets: It's a charge added to the filtered historical simulation VAR price risk calculation to account for the price impact risk of liquidating positions. Part one calculates the Concentration Threshold or the amount over what can be safely liquidated in 1 day without causing price impact. Any amount over what can be liquidated in one day without price impact is called “Excess Quantity.” Therefore, the concentration charge liquidates a portfolio in a way that aligns with the concentration threshold to ensure no excess quantity exists that causes price impact and toxic debt. --- # 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. Learn more at gitbook.com. ## Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter, and the optional `goal` query parameter: ``` GET https://docs.concordia.systems/future-roadmap/concentration-risk.md?ask=&goal= ``` `ask` is the immediate question: it should be specific, self-contained, and written in natural language. `goal` is optional and describes the broader end goal you are ultimately trying to accomplish on behalf of the user. GitBook uses it to tailor the answer towards what is most useful for that goal. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.