> For the complete documentation index, see [llms.txt](https://docs.bima.money/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.bima.money/operations-and-governance/risk-management.md).

# Risk Management

<figure><img src="https://1150339483-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FuV0XpSBB66aR52DO5D6k%2Fuploads%2FEW2Xo1RFg1LQdXl5Fykv%2Frisk-controls.svg?alt=media&amp;token=70cd9b6a-8312-45a5-85d0-8924348ff78b" alt=""><figcaption></figcaption></figure>

## Price volatility

**The risk.** Bitcoin is volatile. A fall reduces what your collateral is worth at settlement, while your repayment obligation stays the same.

**The controls.**

* **Collar protection** below the put strike, bounding how far your loss can go
* **50% LTV** a conservative loan against the collateral value
* **No liquidations** a price fall cannot force a sale of your collateral
* **Fixed 12-month term** no repricing, no margin calls, no mid-term changes

**What remains with you.** The fall between your deposit price and the put strike. Protection bounds the outcome; it does not remove market exposure.

## Capped upside

**The risk.** Gains above the call strike are given up. In a strong bull market you will underperform simply holding.

**The controls.**

* Strike levels **published before you claim**, so you can decide with the numbers in front of you
* Strikes **fixed for the full term** they cannot be moved against you
* Claiming is optional

**What remains with you.** The opportunity cost. This is not a defect to be managed away it is the price of 0% financing and downside protection.

## Counterparty risk

**The risk.** FalconX holds the collateral under the collar for the duration of the term.

**The controls.**

* An established institutional counterparty, named up front
* Vault infrastructure and asset verification through Accountable
* Reconciliation across the vault lifecycle

**What remains with you.** Institutional counterparties can fail. Exposure is concentrated in a single counterparty for twelve months.

## Operational risk

**The risk.** Collar settlement, distribution and redemption depend on off-chain processes and approvals.

**The controls.**

* Approval layers for distribution and redemption
* Defined redemption windows rather than ad-hoc processing
* Reconciliation between on-chain records and off-chain positions

**What remains with you.** Timing risk. The 7–15 day redemption window exists because these processes take time.

## Smart contract risk

**The risk.** The vault holds deposits and governs claims, repayment and redemption. A flaw could affect funds.

**The controls.** Audits and security disclosures will be published at [Security and Audits](broken://pages/6efc471e7dfc6ed79c96bd9abd51c3ce4abafacb).

**What remains with you.** Smart contract risk never reaches zero, audited or not.

{% hint style="warning" %}
Controls reduce risk. They do not remove it. Read the [Risk Disclosures](broken://pages/cfdf51e33f98ad1a3481b9a45ee01e01ff21a74e) in full before depositing.
{% endhint %}