> For the complete documentation index, see [llms.txt](https://docs.noon.capital/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.noon.capital/5.-the-security-framework/disciplined-risk-management.md).

# Disciplined Risk Management

How is capital exposure bounded, and how are strategies approved? Protocol-wide allocation limits, oracle circuit breakers, liquidity waterfalls, and governance gates.

## <mark style="color:$success;background-color:$success;">**Prevent**</mark>

Yield without rigorous risk management is simply unpriced risk. <mark style="color:purple;">**Noon**</mark> treats risk management as an active, multi-layered discipline designed to ensure that no single strategy failure, market drawdown, or counterparty default can compromise protocol solvency or <mark style="color:violet;">**$USN**</mark> peg stability.

This page details the structural controls governing <mark style="color:purple;">**Noon**</mark>’s deployment basket across four core risk modules:

<figure><img src="https://3816918787-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FL26rQzcNmiUZrCXkxkjS%2Fuploads%2FleGVCMSUhbOUrSR4hlfi%2FRiskMatrix.png?alt=media&amp;token=d411a9c1-d650-4057-9472-bac3f6feca9d" alt=""><figcaption></figcaption></figure>

## <mark style="color:$primary;">1. Basket Limits & Strategy Classifications</mark>

<mark style="color:purple;">**Noon**</mark> deploys reserves across a diversified basket of strategies. Rather than treating all yield sources equally, each asset class is assigned a specific risk profile, delta classification, and structural allocation cap:

* **Delta-Neutral Arbitrage (Funding Rate & Basis Trades):** True market-neutral execution comprising offsetting spot and perpetual futures short positions. Zero directional market exposure, bounded by execution and exchange-spread parameters.
* **Uncorrelated RWA & Institutional Credit (T-Bills, CLOs, Private Credit):** Non-directional assets carrying no crypto token or equity price exposure, but subject to macro interest-rate cycles and credit risk.
* **DeFi Lending & Principal Tokens (PTs):** Fixed and variable yield strategies without price exposure, subject to smart contract execution and money-market rate dynamics.
* **Yield Looping:** Structured leverage strategies sitting at the higher-risk end of the allocation basket, strictly constrained by conservative Loan-to-Value (LTV) limits and automated health-factor floors.

#### Position-Level Bounding Rules

To protect reserves against over-concentration or market illiquidity, capital is bounded across three distinct vectors:

1. **Single-Strategy Allocation Caps:** Upper bounds prevent over-exposure to any single asset class.
2. **Counterparty & Venue Limits:** Exposure limits bound capital held across individual custodians, execution venues, and credit facilities.
3. **DeFi Liquidity Kinks:** On-chain lending deployments are capped relative to pool depth above the protocol "kink rate," guaranteeing that <mark style="color:purple;">**Noon**</mark> can unwind positions without driving up interest rates or causing pool illiquidity.

## <mark style="color:$primary;">2. Oracle Architecture & Price Safeguards</mark>

Yield strategies and protocol valuations depend on exact, real-time pricing feeds. <mark style="color:purple;">**Noon**</mark> enforces multi-provider oracle protection directly at the smart contract level:

<figure><img src="https://3816918787-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FL26rQzcNmiUZrCXkxkjS%2Fuploads%2FiQ7eIkw5QfNNTzooasoz%2FOraclePipeline.png?alt=media&amp;token=a6d329a6-ad3a-47ca-adcd-7b6f39c080cc" alt=""><figcaption></figcaption></figure>

* **Multi-Provider Aggregation:** Price feeds draw from independent oracle networks, eliminating single-provider reliance.
* **Staleness & Deviation Circuit Breakers:** Smart contracts automatically reject pricing updates if data feeds become stale, exceed predefined deviation thresholds, or experience sequencer outages.
* **Cross-Chain Monitoring:** Automated 24/7 monitoring tracks feed latency, cross-source divergence, and network L2 uptime.

> <mark style="color:$warning;">**Verification:**</mark> Canonical oracle feed addresses and parameters are published on [Contract Addresses & Oracles](/6.-resources/contract-addresses-and-oracles.md).

## <mark style="color:$primary;">3. The Liquidity Waterfall</mark>

To accommodate withdrawals seamlessly during high-volume periods without forcing panic asset sales, protocol reserves are structured into a Liquidity Waterfall:

<figure><img src="https://3816918787-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FL26rQzcNmiUZrCXkxkjS%2Fuploads%2F0g6gKeUpuQOFtG5vMAWN%2FLiquidityWaterfall.png?alt=media&amp;token=8b733324-ca86-44eb-9aa5-d11f1e8f8645" alt=""><figcaption></figcaption></figure>

#### Residual Risk Disclosure: Proprietary Liquidity Management (PLMS)

A portion of Tier-1 and Tier-2 redemption capacity is facilitated via a Proprietary Liquidity Management Structure (PLMS). This PLMS is a series of agreements with institutional third parties under confidential terms, which allow <mark style="color:purple;">**Noon**</mark> to meet the terms detailed in the Liquidity Waterfall, above.

* **The Residual Risk:** If the PLMS arrangement becomes temporarily or permanently unavailable, the private-credit portion of the reserve reverts to its native underlying redemption schedule. For the Fasanara Tactical Private Credit (F-TAC) position, the underlying redemption timeline extends up to T+3 months.

> #### If required, <mark style="color:purple;">**Noon**</mark> <mark style="color:$warning;">can provide an attestation from our private credit partner</mark>, confirming their review of <mark style="color:purple;">**Noon**</mark>'s PLMS, and their assessment that it allows all redemptions within T+5.

## <mark style="color:$primary;">4. Strategy Governance & The Approval Pipeline</mark>

No strategy enters the deployment basket without passing a rigorous, 4-phase governance-gated pipeline:

<figure><img src="https://3816918787-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FL26rQzcNmiUZrCXkxkjS%2Fuploads%2F0oDpyDtG5KohIKfKvFMX%2FStrategyGate.png?alt=media&amp;token=ccbd6032-9fec-4507-a3b4-1f0364382f08" alt=""><figcaption></figcaption></figure>

1. **Selection & Due Diligence:** Initial risk, yield, and legal review by protocol risk engineers.
2. **Public Risk Assessment:** Publication of an exhaustive risk report detailing strategy mechanics, counterparty exposure, and stress-test scenarios.
3. **Binding Governance Gate ($sNOON vote):** $sNOON stakers vote to approve or reject the strategy proposal.
4. **Execution Planning & Constrained Scaling:** Technical adapter deployment, small-scale test allocations, and gradual scaling under position caps.

#### Strategy Inventory Record

<figure><img src="https://3816918787-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FL26rQzcNmiUZrCXkxkjS%2Fuploads%2FxJqGSBwaV1So3vzmBq74%2FStrategyTable.png?alt=media&amp;token=1ff035bb-257c-4383-8f1d-7f4bff49e021" alt=""><figcaption></figcaption></figure>

| Strategy Name                     | Category               | Governance Status                                                           | Allocation Role                     |
| --------------------------------- | ---------------------- | --------------------------------------------------------------------------- | ----------------------------------- |
| Short-Term U.S. T-Bills           | Real-World Asset       | <mark style="color:$success;background-color:$success;">**APPROVED**</mark> | Risk-Off Baseline Yield             |
| Funding Rate Arbitrage            | CeFi Delta-Neutral     | <mark style="color:$success;background-color:$success;">**APPROVED**</mark> | Crypto Bull-Market Spread Harvest   |
| JAAA AAA-Rated CLOs               | Institutional Credit   | <mark style="color:$success;background-color:$success;">**APPROVED**</mark> | Floating-Rate RWA Income            |
| Private Credit (F-TAC)            | Real-World Asset       | <mark style="color:$success;background-color:$success;">**APPROVED**</mark> | Non-Correlated Fixed Income         |
| Overcollateralized DeFi Lending   | On-Chain Money Market  | <mark style="color:$success;background-color:$success;">**APPROVED**</mark> | High-Demand Liquidity Supply        |
| Principal Tokens (PTs)            | Structured Fixed Yield | <mark style="color:$success;background-color:$success;">**APPROVED**</mark> | Fixed APY Rate-Cut Insulation       |
| Recursive Yield Looping           | Leveraged On-Chain     | <mark style="color:$success;background-color:$success;">**APPROVED**</mark> | Sized Risk-Adjusted Yield Booster   |
| Spot-Futures Basis Trading        | Market-Neutral         | <mark style="color:$success;background-color:$success;">**APPROVED**</mark> | Spreads Arbitrage                   |
| Business Development Corps (BDCs) | Private Equity Credit  | <mark style="color:$danger;background-color:$danger;">**REJECTED**</mark>   | Failed Risk Assessment (Volatility) |

{% hint style="info" %}
Check all our strategies here: [Yield Strategies](/3.-the-yield-engine/yield-strategies.md)
{% endhint %}