Risks and Mitigants

Key external risks in the architecture of Resolv are counterparty credit risk, market risk, and liquidity risk. Below is their brief description together with the features of the protocol aimed at managing these risks.

Risk Category	Description	Risk Management
Counterparty Credit Risk	Risk of loss due to insolvency of a trading venue. Exposed assets are: Margin held with an exchange Unrealized gains (see more)	Margin for futures positions is held with third-party custodians outside of exchanges. RLP will cover the amount of unrealized gains. Exposure to trading venues to be diversified to mitigate single counterparty risk.
Market Risk	Risk of loss due to negative funding rates	Futures are allocated to highly liquid exchanges to reduce risk of spot-futures price mismatch, which affects funding rates. RLP will cover losses from negative rates at all times.
Liquidity Risk	Risks of significant liquidity withdrawals from the protocol affecting its stability. For example, substantial withdrawals from RLP	Redemption of RLP is suspended if USR Collateralization Ratio (CR) is below 110%.