# Risks (1) credit risk -- Structured trades with market makers who may default. We choose accredited MMs who pass KYC and who have a history of credit worthiness. Much of this risk is mitigated by requiring significant or full collateralization of short option positions, and cash purchase of long positions; \ (2) principal at risk -- investors are taking either a bullish or bearish perspective towards crypto markets. Vaults are risk-managed and losses in any given Epoch are limited. However, if markets move against an investor’s position, especially over continuous Epoch cycles, the investor may lose some portion of their initial investment; \ (3) smart contract risk -- Smart contracts are audited and their designed is verified by third parties (see Audits section). Risk mitigation practices are introduced. Those include active smart contract and accounts monitoring, and the ability to “pause” vaults. All critical actions need multiple signatures to be performed, by authorized principals. All user actions are recorded and tracked. Treasury funds are managed by MPC and multisig based wallets. --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://yield-finance.gitbook.io/yield-finance-docs/security-and-risk/risks.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.