Risk Management and Curation Methodology

Automated Risk Management Solutions

We combine extensive risk oversight with sophisticated automatic risk rebalancing and yield optimization strategies to ensure our vaults are optimally allocated to lending markets in any market condition.

Our methodology incorporates sophisticated models for liquidity, price trajectories, and network congestion based on historical onchain data and simulated market stress events. We incorporate dynamic monitoring of broader market liquidity for all collateral assets to ensure that profitable liquidations will continue in severe market conditions.

Our strategies automatically rebalance out of lending pools when necessary (e.g. market instability) with increased risk profiles under the supervision of our experienced on-call risk management team. We include some examples of this in the Resources section.

Market Allocation Strategy

Market allocation is the most impactful action influencing vault composition, with a central role in defining a vault’s risk profile and overall APY.

To inform our allocation strategy, we use fine-tuned optimization algorithms tested over historical and simulated market scenarios to target the best risk-adjusted returns.

When allocating to a market, there are three main actions we can take that impact a vault’s risk profile and APY:

1. Adding a new market: When a new market is added and supply is allocated, the vault APY will change based on the allocation percentage and the supply APY rate.

2. Adjusting market allocations: To ensure Gauntlet-curated Vaults remain optimized for risk-adjusted yield, our models constantly review market allocations and make necessary adjustments.

3. Adjusting market caps: The caps we set serve to limit vault exposure to any one market. A cap represents the total amount of supply that can be allocated to a particular market.

4. Collaborate with market owners: To optimize risk parameters and enhance market efficiency.