> For the complete documentation index, see [llms.txt](https://sector-finance.gitbook.io/sector-finance/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://sector-finance.gitbook.io/sector-finance/risk-engine/description.md).

# Description

Sector's risk engine analyzes data to identify and assess risk for various investment strategies. The risk engine powers all of the investment products.

The risk engine... 

* Helps users make better-informed decisions about their investing activities
* Provides information about risks associated with specific protocols and crypto assets
* Informs the development of the risk-tranched vaults 

The biggest challenge in assessing risk in DeFi consists of accounting for black-swan-like events such as smart contract hacks and stable-coin de-pegs. This is similar to assessing insurance premiums for catasrophic events. We approach this task by estimating probabilites and associated losses for such events. 

<figure><img src="https://1287585702-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2Faizh7QHFZ0AM4JGHZRn6%2Fuploads%2Fq6HLWngNDLrVgniNeODM%2FSector%20Finance%20Deck%20(2).jpg?alt=media&amp;token=b3c3acdf-00c3-494e-b95d-3eb29b9df82f" alt=""><figcaption></figcaption></figure>