Orma Credit Scoring: Six Risk Dimensions Explained

A vault score is an ordinal credit grade — one of twenty steps from AAA down to D — derived entirely from public ledger state. Orma reads the live fields of the Vault, LoanBroker, and Loan objects on every poll, measures five independent risk dimensions, and assembles them into a composite by anchoring on the redemption cliff and applying a sequence of named notches. No weights are applied anywhere. A strong factor cannot pay for a broken one: if liquidity is fine but cover is exhausted, the score reflects a vault with exhausted cover, not the average of those two facts.

The six dimensions

Orma computes five measured factors and one composite. The API returns all six as rows in score.dimensions so a table can render them together, but HEADLINE is the result of scoring, not a sixth input.

Key	Label	What it measures
`LIQUIDITY`	Liquidity cover	`AssetsAvailable` as a share of `AssetsTotal` — how much of the vault’s capital is liquid right now
`COVER`	First-loss adequacy	Liquidatable cover divided by the exposure it must absorb — the double-product `CoverRateMinimum × CoverRateLiquidation` applied to total broker debt, against recognised loss or distressed principal (whichever is larger)
`CONCENT`	Concentration	Largest single loan as a share of `LoanBroker.DebtTotal` — because cover is keyed to total debt, one outsized loan consumes disproportionately little cover when it defaults
`RECOG`	Recognition lag	How many seconds an exposure has been overdue without the broker declaring impairment — the maximum across all loans in `overdue` or `defaultable` status
`DEADLINE`	Redemption cliff	Projected shortfall of claims over available liquidity at the redemption date, expressed as a percentage of net claims
`HEADLINE`	Composite	Ordinal notching of the five dimensions — the vault’s overall grade

No weights are applied anywhere in this system. A weighted average would let a strong factor compensate for a broken one. Orma’s notching approach means each factor can only make a grade worse, never better.

Band tables

Each factor is independently graded on the 20-step ordinal ladder. Thresholds are evaluated top to bottom; the first threshold the value reaches wins, and D if none does.

Liquidity (LIQ)
First-Loss Adequacy (COV)
Concentration (CNC)
Recognition Lag (RECOG)
Redemption Cliff (DDL)

Graded on AssetsAvailable / AssetsTotal. Defined as 1 when AssetsTotal is zero.

Threshold	Grade
≥ 0.95	AAA
≥ 0.85	A
≥ 0.70	BBB
≥ 0.50	BB
≥ 0.25	B
≥ 0.05	CCC
< 0.05	D

Graded on min(⌈D·cₘᵢₙ·c_liq⌉, C) / max(L, P_distressed). Defined as 1 when the denominator is zero (no exposure to absorb).

Threshold	Grade
≥ 1.00	AA
≥ 0.50	A-
≥ 0.20	BBB-
≥ 0.05	BB-
≥ 0.01	B-
< 0.01	D

Graded on 1 − (largest loan / DebtTotal). Higher concentration is worse; the grade is on the complement so higher is better.

Threshold	Grade
≥ 0.80	AA
≥ 0.60	A-
≥ 0.40	BBB-
≥ 0.20	BB-
< 0.20	D

Threshold	Grade
≤ 0 s	AAA
< 60 s	A
< 300 s	BBB
< 900 s	BB
≥ 900 s	CCC

Graded on 1 − (shortfallPct / 100). Shortfall is max(0, claims − liquidityAtRedemption) expressed as a percentage of net claims.

Threshold	Grade
= 1.00 (0% shortfall)	AAA
≥ 0.98 (≤ 2% shortfall)	AA
≥ 0.90	A
≥ 0.75	BBB
≥ 0.50	BB
≥ 0.25	B
≥ 0.10	CCC
< 0.10	D

Ordinal notching

The composite grade anchors on the redemption cliff (DEADLINE). For a fixed-term facility the headline question is whether claims can be met at the redemption date; the other factors modify confidence in that answer. Starting from the DEADLINE grade, Orma applies each of the following notch rules in order.

Realised capital destruction (ρ)

Every other factor measures current exposure. A realised loss leaves none behind: the write-off removes the asset from AssetsTotal, the provision releases, and the book reads clean. Without a memory term, a facility that defaulted on 80% of its loans would score AAA the moment the write-off settled — indistinguishable from one that never lost a penny. Realised destruction is:

ρ = max(0, (SharesOutstanding − AssetsTotal) / SharesOutstanding)

Measured against AssetsTotal, not against AssetsTotal − LossUnrealized. An unrealised loss is a provision against an asset the vault still holds and may recover. Counting it would penalise a manager for disclosing early — the opposite of the behaviour Orma exists to reward.

Condition	Notch (Δ)
ρ ≥ 75%	−14
ρ ≥ 50%	−12
ρ ≥ 25%	−8
ρ ≥ 10%	−5
ρ ≥ 2%	−3
ρ > 0%	−1

Remaining notch rules

After the destruction term, Orma applies these rules in sequence. The two recognition-lag rules are mutually exclusive (the larger one wins).

Condition	Notch (Δ)
Recognition lag > 300 s	−2
Recognition lag > 0 s	−1
Largest loan ≥ 75% of broker debt	−1
Liquidatable cover < 5% of recognised loss	−1
`LIQUIDITY` grade ≤ B and vault is in Redemption phase	−2

The last rule fires when withdrawals are failing now rather than might fail at redemption. It applies only during the Redemption phase.

The notch ladder

The full ladder, ordered best to worst, has 20 steps:

AAA  AA+  AA  AA-  A+  A  A-  BBB+  BBB  BBB-
BB+  BB  BB-  B+  B  B-  CCC  CC  C  D

A notch of −1 moves one step toward D. The grade is clamped: it can never go below D or above AAA. Orma also computes a numeric representation of each grade for oracle publication:

gradeNumeric = round(100 × (1 − ladderIndex / 19))

AAA = 100, D = 0. This is published as the HDL dimension in the XLS-47 Oracle object.

Conduct grade

The conduct grade is a separate assessment of the manager’s behaviour, not the vault’s current book. It starts at 100 and is clamped to [0, 100], then mapped to a letter grade.

Observation	Penalty
Sequence score φ < 0.25 (ordering close to investor-worst)	−35
Sequence score 0.25 ≤ φ < 0.75	−15
A loss written off with no prior impairment	−20 each
A withdrawal of first-loss capital	−10 each

Score	Grade
≥ 90	A
≥ 75	B
≥ 55	C
≥ 35	D
< 35	E

The sequence score φ measures where observed first-loss capital consumption falls between the investor-worst and investor-best orderings. See the Mathematics reference for the full derivation. The conduct grade surfaces in GET /api/vaults/:vaultId/broker-history under the reputation block.

The `notchTrace` field

Every notch applied is emitted in notchTrace on the vault detail response. Each entry records the grade before the rule fired, the rule text, the delta, and the grade after.

"notchTrace": [
  {
    "from": "AAA",
    "rule": "anchor on DEADLINE (can claims be met at redemption)",
    "delta": 0,
    "to": "AAA"
  },
  {
    "from": "AAA",
    "rule": "single loan >= 75% of broker debt (cover is keyed to total debt, not loan size)",
    "delta": -1,
    "to": "AA+"
  },
  {
    "from": "AA+",
    "rule": "liquidatable cover < 5% of the exposure it must absorb",
    "delta": -1,
    "to": "AA"
  }
]

The trace is the answer to “how did you choose your weights”: there are no weights, there are notches, and each one is named. Walk the trace against the band tables above to reproduce any grade from the raw ledger fields.

The score.dimensions array always contains six rows — five measured factors plus HEADLINE. Do not average all six: HEADLINE is derived from the other five, so averaging it back in counts the composite twice.

Worked example

Calder Structured Credit III at ledger 5263343: AssetsTotal = 51,000,000, AssetsAvailable = 41,000,000, LossUnrealized = 10,000,000, SharesOutstanding = 51,000,000, DebtTotal = 10,000,000, CoverAvailable = 5,000,000, cₘᵢₙ = c_liq = 10000, one impaired loan of 10,000,000, phase Investment.

Grade each dimension

Dimension	Calculation	Raw value	Grade
Liquidity	41 / 51	0.8039	BBB
Liquidatable cover	⌈10,000,000 × 0.01⌉	100,000	—
First-loss adequacy	100,000 / max(10M, 10M)	0.0100	B-
Concentration	10M / 10M	1.0000	D
Recognition lag	already declared	0 s	AAA
Redemption cliff	0% shortfall	0.00%	AAA

Anchor on DEADLINE

Composite starts at AAA.

Apply notches

ρ = 0 (AssetsTotal ≥ SharesOutstanding), no destruction notch.Concentration = 1.0 ≥ 0.75 → −1 → AA+Cover adequacy 0.01 < 0.05 → −1 → AA

Final grade

Composite grade: AA, numeric 89.

For the full mathematical derivations of each formula — including the double-product cover calculation, the redemption cliff projection, and the realised-destruction term — see the Mathematics reference.

Get Started

Core Concepts

Guides

Reference

Orma Credit Scoring: Six Risk Dimensions Explained

The six dimensions

Band tables

Ordinal notching

Realised capital destruction (ρ)

Remaining notch rules

The notch ladder

Conduct grade

The `notchTrace` field

Worked example

​The six dimensions

​Band tables

​Ordinal notching

​Realised capital destruction (ρ)

​Remaining notch rules

​The notch ladder

​Conduct grade

​The notchTrace field

​Worked example

The six dimensions

Band tables

Ordinal notching

Realised capital destruction (ρ)

Remaining notch rules

The notch ladder

Conduct grade

The `notchTrace` field

Worked example