> 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...&#x20;

* 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&#x20;

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.&#x20;

<figure><img src="/files/ER55AiM1DzfGAAnzN5XH" alt=""><figcaption></figcaption></figure>


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