Overview
Risk parameters define the boundaries within which you can operate. They protect depositors and ensure vault behavior matches expectations.Core Parameters
Position Concentration
Maximum allocation to any single position:
Why it matters: Prevents catastrophic loss from single position failure.
Protocol Concentration
Maximum allocation to any single protocol:
Why it matters: Limits smart contract risk to any one protocol.
Maturity Limits
Why it matters: Shorter max = more liquidity, less rate exposure.
Cash Buffer
Minimum cash/liquid assets for withdrawals:
Why it matters: Ensures withdrawal availability.
Setting Parameters
At Creation
Parameters set at vault creation are binding:Post-Creation Changes
Enforcement
Hard Limits
Cannot be exceeded under any circumstances:- Max single position
- Max protocol concentration
- Allowed protocol list
Soft Limits
Can be temporarily exceeded, requires action:- Cash buffer (can drop due to withdrawals)
- Target allocations (drift allowed)
Monitoring
Dashboard Alerts
Reports
Weekly risk report includes:- Current allocation vs limits
- Concentration metrics
- Liquidity status
- Upcoming maturities
Risk Scenarios
Scenario: Large Withdrawal
Scenario: Position Limit Approach
Best Practices
Conservative Start
Begin with tighter limits; loosen as you gain experience
Buffer Room
Set limits 10-20% below what you think you need
Match Strategy
Parameters should reflect stated strategy
Regular Review
Weekly check of all risk metrics
FAQs
Can I exceed limits temporarily?
Can I exceed limits temporarily?
Hard limits: No. Soft limits: Yes, with required follow-up action.
What if market conditions change?
What if market conditions change?
You can tighten limits immediately. Loosening requires governance.
How do limits affect performance?
How do limits affect performance?
Tighter limits = less flexibility but more safety. Balance based on your strategy.