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Overview

Risk parameters define the boundaries within which you can operate. They protect depositors and ensure vault behavior matches expectations.

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Core Parameters

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Position Concentration

Maximum allocation to any single position:
SettingConservativeModerateAggressive
Max single position10-15%15-20%20-25%
Why it matters: Prevents catastrophic loss from single position failure.

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Protocol Concentration

Maximum allocation to any single protocol:
SettingConservativeModerateAggressive
Max protocol exposure50-60%60-80%80-100%
Why it matters: Limits smart contract risk to any one protocol.

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Maturity Limits

ParameterConservativeModerateAggressive
Min maturity30 days14 days7 days
Max maturity90 days180 days365 days
Why it matters: Shorter max = more liquidity, less rate exposure.

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Cash Buffer

Minimum cash/liquid assets for withdrawals:
SettingConservativeModerateAggressive
Min cash buffer15-20%10-15%5-10%
Why it matters: Ensures withdrawal availability.

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Setting Parameters

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At Creation

Parameters set at vault creation are binding: 
Immutable at creation:
├── Allowed protocols
├── Base asset
├── Strategy type
└── Max concentration limits (can only tighten)

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Post-Creation Changes

Change TypeProcessTimeline
Tighten limitsCurator decisionImmediate
Loosen limitsGovernance vote14-day vote + 7-day delay
Add protocolGovernance vote14-day vote + 7-day delay
Remove protocolCurator decisionImmediate

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Enforcement

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Hard Limits

Cannot be exceeded under any circumstances:
  • Max single position
  • Max protocol concentration
  • Allowed protocol list
Attempting to exceed triggers transaction revert.

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Soft Limits

Can be temporarily exceeded, requires action:
  • Cash buffer (can drop due to withdrawals)
  • Target allocations (drift allowed)
Alert triggers when soft limits breached.

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Monitoring

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Dashboard Alerts

AlertTriggerPriority
Concentration warning>80% of limitMedium
Concentration breachAt limitHigh
Cash buffer low<50% of targetMedium
Cash buffer critical<25% of targetHigh

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Reports

Weekly risk report includes:
  • Current allocation vs limits
  • Concentration metrics
  • Liquidity status
  • Upcoming maturities

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Risk Scenarios

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Scenario: Large Withdrawal

Vault Status:
├── AUM: $1,000,000
├── Cash: $100,000 (10%)
├── Min buffer: 10%

Withdrawal request: $150,000

Problem: Would push cash to -5% (below buffer)

Options:
1. Partial fill: Process $50,000 now
2. Queue: Add $100,000 to queue
3. Liquidate: Sell positions to meet request

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Scenario: Position Limit Approach

Vault Status:
├── Position A: 18% of vault
├── Max position: 20%

Position A appreciates 15%:
├── New weight: 20.7%
├── Status: BREACH

Required action: Reduce Position A to ≤20%

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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

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FAQs

Hard limits: No. Soft limits: Yes, with required follow-up action.
You can tighten limits immediately. Loosening requires governance.
Tighter limits = less flexibility but more safety. Balance based on your strategy.