# Risk framework

Aladdin DAO's absolute priority is to guarantee the integrity of all stakeholders' capital. Please find the risk framework applied to f(x) Protocol below.

**Risk Management Framework**

* Real-time monitoring of xPOSITION leverage and collateralization ratios, with automatic triggers for rebalancing or liquidation to ensure stability.

**Real-Time Leverage Fluctuations**

* Leverage ratios are dynamically adjusted in response to market volatility and user actions, maintaining balance across the system.

**Rebalance and Liquidation Triggers**

* Threshold-based mechanisms initiate rebalancing or liquidation to preserve system integrity and stability.

**Reserve Fund and Bad Debt Redistribution**

* Reserve funds bolster the system’s risk resistance.
* In cases of under-collateralized debt, the shortfall is proportionally redistributed across active positions if reserves are insufficient.

**Recapitalization**

If the total collateralization ratio drops below 100%, the protocol halts new xPOSITION openings and deploys protocol assets to restore the fxUSD peg.