Risk Management
This page describes the main user-facing risks and operational edge cases relevant to the AIRTrading Engine, together with the mitigation approach described in this documentation set.
The intended operating model documented here is no leverage. Risk communication therefore focuses on execution and market risks rather than leverage-driven liquidation scenarios.
Risk categories
1) Adverse market moves
What it is Market prices can move against a strategy after entry or during an unwind.
Why it matters This affects realized outcomes, user exit values, and epoch performance.
Mitigation approach
strategy validation on AIRTrack before deployment
rule-based stop logic and target management
controlled execution procedures
portfolio-level monitoring and strategy review
2) Slippage
What it is The executed price may differ from the expected price, especially during volatility or lower liquidity conditions.
Why it matters Slippage can reduce realized PnL, reduce exit values, and affect fairness during high-volume withdrawal events.
Mitigation approach
staged order execution where appropriate
liquidity-aware execution logic
conservative assumptions in performance review
transparent reporting of realized outcomes rather than estimated outcomes
3) Execution timing
What it is The protocol and execution stack may require time to process pro-rata reductions, settlement actions, and periodic accounting.
Why it matters Timing differences can affect realized prices and can increase operational variance during stressed markets.
Mitigation approach
deterministic accounting rules (pro-rata closes, ExitTicket creation, epoch settlement rules)
immediate user exclusion from PnL after WithdrawRequest to prevent double allocation
operational procedures for orderly execution and reconciliation
4) Fees and venue costs
What it is Trading fees, swap costs, and other venue-related execution costs reduce net outcomes.
Why it matters Gross performance and net distributable performance are not the same.
Mitigation approach
explicit fee treatment in settlement logic
net-profit accounting before AIR3 split
user-facing documentation of fee impact in examples and formulas
5) Strategy underperformance
What it is A validated strategy can still underperform after deployment because market conditions change.
Why it matters Historical or simulated performance does not guarantee future performance.
Mitigation approach
AIRTrack live validation before promotion
ongoing review and performance monitoring
strategy deactivation / replacement procedures (implementation-specific)
transparent communication of results
6) Temporary delays under stress conditions
What it is Periods of unusual market activity or simultaneous user actions may increase execution and reconciliation time.
Why it matters Users may experience slower processing of operational steps even when accounting rules remain unchanged.
Mitigation approach
fixed and deterministic withdrawal settlement model (ExitTicket + 7-day delay)
orderly processing for pro-rata closes
clear event logging and status communication
Mass exit scenario (many users request withdrawal)
If many users request withdrawal in a short window, the protocol applies the same core rule consistently:
each user exit is processed using their percentage share at request time
the vault closes the same percentage of all open positions pro-rata
exit balances are created as ExitTickets
users are excluded immediately from further PnL and epoch rewards
Practical effect on positions
A large aggregate withdrawal ratio (for example, 90% of total vault value) reduces approximately the same percentage of each open position. The vault portfolio is resized rather than selectively closed.
This is operationally intensive and may increase slippage and execution variance, but the accounting rule remains consistent.
Operational limits and implementation-specific controls
The following controls are implementation-specific and may vary by deployment version:
order execution throttling / staging
venue-side execution parameters
stable buffer targets
strategy-level size limits
temporary operational safeguards during abnormal conditions
Related pages
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