Risk Management
Risk controls operate at the position, market, and vault levels so that adverse moves are contained and predictable. This section focuses on how BasePerp measures health, unwinds risk, and protects liquidity under stress.
4.1 Collateral Health Ratio (CHR)
CHR is the canonical safety metric for positions. It answers a simple question: does this position still meet its maintenance requirement?
Definition. CHR = Equity / MaintenanceRequirement, where Equity = collateral + unrealizedPnL − accruedFees. Thresholds. A position becomes eligible for liquidation when CHR ≤ liquidationThreshold (per-market). Transparency. Current CHR, maintenance levels, and margin calls surface in events and UI so users can act before thresholds are hit.
4.2 Leverage Limits & Maintenance
Leverage is calibrated per asset so that volatility and on-chain liquidity are reflected in margin needs. Positions open with initialMargin and must remain above liquidationThreshold via CHR to stay active. Additional guardrails—per-account notionals and per-market concentration caps—prevent outsized single-actor exposure.
4.3 Liquidation Process & Incentives
When maintenance is breached, the system aims to unwind exposure quickly and fairly, minimizing spillover.
Trigger. Anyone may call liquidation once CHR ≤ liquidationThreshold.
Execution. The engine closes part or all of the position at an oracle-referenced price; the same deviationGuard validation applies. Partial liquidations are preferred to reduce risk first.
Incentive. Successful liquidators receive a liquidatorBounty (percentage of recovered collateral). Bounty ladders can step up with urgency or size.
Shortfalls. In extreme gaps that create bad debt, a rules-based securitySlashCap may allow limited slashing of the staked backstop (if activated), followed by pre-disclosed recovery steps.
4.4 Vault-Level Protections
The unified stablecoin vault is continuously monitored and reacts to stress with explicit, observable mechanics.
Buffer ratio. A live resilience metric that reflects the vault’s headroom against trader PnL shocks.
Dynamic withdrawals. When the buffer is low, temporary withdrawal tiers (including fee steps and optional size caps) activate to slow runs; tiers revert automatically as conditions normalize.
Optional hedging. Policy-driven delta hedging is used only when expected benefit exceeds cost; venues, limits, and reports are disclosed.
4.5 Circuit Breakers & Pauses
Automated guards pause actions that add risk while allowing safe operations to continue.
Oracle liveness. New executions pause on stale or out-of-band data; users can still cancel and withdraw.
Volatility halts. Short cool-downs after extreme moves reduce cascade risk and give keepers time to rebalance.
Governance safety. Critical parameter and code changes are timelocked; emergency powers are narrow, auditable, and time-boxed.
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