> For the complete documentation index, see [llms.txt](https://docs.markovlabs.xyz/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.markovlabs.xyz/curation-methodology/risk-framework.md).

# Risk Framework

Markov Labs’ risk framework is built on two core components: **collateral inclusion** and **continuous market monitoring**. Together, these ensure that assets are carefully selected before allocation and actively managed throughout their lifecycle within the vault.

#### Collateral Standards

Collateral inclusion is evaluated through a combination of **market-level** and **protocol-level** analysis, ensuring that both the asset environment and underlying infrastructure meet strict risk standards.

* [**Market-Level Factors**](/curation-methodology/risk-framework/collateral-standards/market-factors.md)**:**
  * [**Liquidity**](/curation-methodology/risk-framework/collateral-standards/market-factors/liquidity.md)**:** Depth across primary and secondary markets, ability to support liquidations with minimal slippage
  * [**Price Dynamics**](/curation-methodology/risk-framework/collateral-standards/market-factors/price-dynamics.md)**:** Volatility, correlation, and susceptibility to sharp price movements
  * [**Parameterization**](/curation-methodology/risk-framework/collateral-standards/market-factors/parameterization.md)**:** Appropriateness of LLTV, caps, and other risk parameters relative to asset behavior
  * [**Liquidation Dynamics**](/curation-methodology/risk-framework/collateral-standards/market-factors/liquidations.md)**:** Efficiency and reliability of liquidation mechanisms, including access to liquidators and unwind pathways
* [**Protocol-Level Factors**](/curation-methodology/risk-framework/collateral-standards/protocol-considerations.md)**:**
  * [**Governance**](/curation-methodology/risk-framework/collateral-standards/protocol-considerations/governance.md)**:** Degree of decentralization, use of timelocks, and ability to anticipate protocol changes
  * [**Transparency**](/curation-methodology/risk-framework/collateral-standards/protocol-considerations/transparency.md)**:** Availability of proof of reserves, reporting standards, and visibility into protocol state
  * [**Smart Contract Risk**](/curation-methodology/risk-framework/collateral-standards/protocol-considerations/smart-contracts.md)**:** Audit quality, security practices, and overall robustness of the codebase

This dual-layer analysis ensures that only assets with strong market fundamentals and reliable protocol infrastructure are considered for inclusion.

#### Monitoring

Once collateral is included, Markov Labs implements a **preemptive monitoring system** designed to detect risks early and respond effectively. This monitoring operates across three primary layers:

* [**Smart Money Scanner**](/curation-methodology/risk-framework/monitoring/smart-money-scanner.md)**:**
  * Monitoring movements of institutional and whale wallets across chains
  * Identifying early signals of capital inflows or outflows
  * Anticipating shifts in liquidity, utilization, or price trends before they fully materialize
* [**Alert System**](/curation-methodology/risk-framework/monitoring/alert-system.md)**:**
  * Real-time alerts based on utilization changes, rate movements, and price volatility
  * Monitoring capital-at-risk thresholds and liquidity conditions
  * Detecting anomalies such as sudden spikes, deviations, or market stress indicators
* [**Circuit Breakers**](/curation-methodology/risk-framework/monitoring/circuit-breakers.md)**:**
  * Automated or manual mechanisms to pause allocations to specific markets
  * Triggered when predefined risk thresholds are breached
  * Designed to prevent further exposure during periods of elevated uncertainty or instability

By combining **rigorous upfront analysis** with **continuous, proactive monitoring**, Markov Labs ensures that risk is both well-understood at entry and actively managed throughout the lifecycle of each market added.