> For the complete documentation index, see [llms.txt](https://delpho.gitbook.io/delpho-docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://delpho.gitbook.io/delpho-docs/risk/peg-and-redemption-risk.md).

# Peg and redemption risk

The USDV peg is structurally separated from sUSDV yield. A USDV holder is not directly exposed to funding direction; funding risk is borne by sUSDV. This separation is not an accident of the design, it is the design.

The peg is defended in layers:

* **Overcollateralization.** Every USDV is minted against collateral worth substantially more than the debt (maximum LTV of 80% for USDC/USDT and 65% for HYPE/kHYPE). A position must move significantly before any portion of its collateral could fail to back the USDV it issued.
* **Redemption at $1.** Any USDV holder can redeem at any time and receive HYPE valued at $1 net of the redemption fee. Arbitrageurs use this to pull the peg back to par whenever USDV trades below $1 on the open market.
* **Treasury-first sourcing.** The protocol holds a smart-contract reserve targeting roughly 5% of TVL, funded from positive-funding inflow. Redemption draws from this reserve first, so the structural hedge stays intact while the peg is being defended.
* **Hedge unwind as last resort.** If treasury depth is not enough, the protocol unwinds the structural hedge, beginning with the lowest-collateral individual positions. Only those positions are affected; USDV holders continue to redeem at $1.
* **Automatic buyback and organic buy pressure** support the peg from the demand side. See [Redemptions and the peg](/delpho-docs/how-delpho-works/redemptions-and-the-peg.md).

The redemption mechanism becomes the source of peg risk only if the treasury reserve is exhausted and the protocol is forced into the hedge-unwind path under thin liquidity. The design is built to make that the second source rather than the first.

In the 10 October 2025 ADL crash, the worst funding event in Hyperliquid's history, USDV's peg held within roughly 1% of par during the stress. See [Stress test results](/delpho-docs/risk/stress-test-results.md).