# Risk Model

To ensure investors have a comprehensive understanding of the potential risks associated with the <mark style="color:blue;">**srETH**</mark> index, we have implemented a robust risk model. This model aims to evaluate and quantify the various risks involved in investing in <mark style="color:blue;">**srETH**</mark>, empowering investors to make informed decisions based on a thorough assessment.

The risk model utilized in <mark style="color:blue;">**srETH**</mark> is the [Genesis Risk Model](https://docs.spool.fi/genesis/genesis-risk-model), also known as the Spool Labs Risk Model. This widely respected framework is extensively used within the Spool Ecosystem. The Genesis Risk Model employs a systematic approach to assign quantifiable risk scores to DeFi protocols. It considers a range of essential input parameters, including:

<table><thead><tr><th>Risk Attribute</th><th>Addressing</th><th data-hidden></th></tr></thead><tbody><tr><td>Risk-Free APY</td><td>This parameter evaluates the risk associated with the expected annual percentage yield (APY) in a risk-free environment, providing an indication of the potential returns without considering any protocol-specific risks.</td><td></td></tr><tr><td>Protocol APY</td><td>The Protocol APY parameter assesses the potential annual percentage yield offered by the DeFi protocol, taking into account both the reward rate and the underlying risks associated with the protocol.</td><td></td></tr><tr><td>Audits</td><td>The number and quality of audits conducted on the protocol are considered to evaluate the level of security and robustness.</td><td></td></tr><tr><td>Bug Bounty</td><td>The presence of a bug bounty program indicates the protocol's commitment to identifying and addressing vulnerabilities, enhancing its security posture.</td><td></td></tr><tr><td>Time Deployed</td><td>This parameter reflects the duration for which the protocol has been operational, providing insights into its track record and stability over time.</td><td></td></tr><tr><td>Total Value Locked (TVL)</td><td>The Total TVL parameter gauges the amount of assets locked within the protocol, indicating the level of trust and confidence placed by the community in the protocol's operations.</td><td></td></tr><tr><td>Depth of Smart Contracts</td><td>This parameter evaluates the complexity and depth of the smart contracts utilized by the protocol, which can impact the potential risks associated with the protocol's operations.</td><td></td></tr><tr><td>Liquidity</td><td>The availability of liquidity for the assets of the Protocol is assessed in order to minimize the level of slippage.</td><td></td></tr></tbody></table>

By incorporating these parameters into the risk model, <mark style="color:blue;">**srETH**</mark> provides investors with a comprehensive assessment of the potential risks involved in investing in the index. This empowers investors to make informed decisions based on a quantifiable evaluation of the risks and rewards associated with the SRETH index.