# 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: 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: ``` GET https://docs.concordia.systems/future-roadmap/concentration-risk.md?ask= ``` The question should be specific, self-contained, and written in natural language. 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.