> 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/risk-overview.md).

# Risk overview

Delpho's design has four primary failure surfaces. Each is treated in detail on its own page in this chapter.

1. **Funding risk.** Funding can compress, flip negative, or stay negative for an extended window. The short leg of the hedge stops earning and starts paying. If borrow costs stay elevated while funding is absent, the spread can be net negative. See [Funding rate risk](/delpho-docs/risk/funding-rate-risk.md).
2. **Liquidation risk.** HYPE/kHYPE positions are exposed to underlying drawdowns. USDC/USDT positions are exposed mainly to stablecoin depeg or oracle-value risk. A user near maximum LTV is exposed to drawdowns in the underlying. See [Liquidation and collateral risk](/delpho-docs/risk/liquidation-and-collateral-risk.md).
3. **Redemption risk.** Redemption demand spikes during stress. If the only redemption path is to unwind the structural position into thin liquidity, the redemption mechanism itself becomes the source of peg risk. See [Peg and redemption risk](/delpho-docs/risk/peg-and-redemption-risk.md).
4. **Execution risk.** Oracles drift. Cross-chain messages delay. Keys can be compromised. A continuously hedged position has more execution surface than a passive CDP. See [Oracle risk](/delpho-docs/risk/oracle-risk.md) and [Smart-contract and execution risk](/delpho-docs/risk/smart-contract-and-execution-risk.md).

The pages that follow describe each failure surface in detail: the mechanism, the protocol's structural response, what is in place at V1, and what is planned for future releases. Page-level cross-references link out to the operational mechanics that live elsewhere in the docs (the [How Delpho works](/delpho-docs/how-delpho-works.md) and [Audits and security](/delpho-docs/audits-and-security.md) chapters in particular).

The headline stress-test result: in the StableWatch backtest of the 10 October 2025 ADL crash, the worst funding event in Hyperliquid's history, USDV showed roughly a 1% peak exchange-rate drawdown. See [Stress test results](/delpho-docs/risk/stress-test-results.md).

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For the long-form essay version of this chapter, see *Delpho Explained, Part 3: The Risk Architecture* on X. **\[PENDING: X thread link once published.]**
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