Vault Risk Management

Seven layers protect vault depositors from directional losses during blowout games.

Protection layers

1. Dynamic Spread — Convex spread scaling: 1% base → 5% at 75% inventory. Volatility + time adjustments.

2. Funding Capture — One-sided flow = high funding income to the vault. Natural hedge — funding is highest exactly when vault risk is highest.

3. Inventory Caps — 20% net, 40% gross per game. 60% total across all games. Enforced at matching engine level.

4. Terminal Convergence — Reduce at 10 min, reduce-only at 5 min, stop at 2 min. Eliminates 60–70% of blowout losses.

5. Circuit Breaker — 3% game loss → stop quoting. 5% → full halt. Prevents single-game spirals.

6. Portfolio Mgmt — 5% daily drawdown → 50% size cut. 8% → halt all. Prevents correlated multi-game losses.

7. Watermark — 10% drawdown from ATH → 50% size + 2× spread until recovery to 5%. Protects from losing streaks.

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