Dynamic Leverage Framework

The maximum leverage offered for any market is not static; it is recalculated continuously based on two independent risk factors. The max leverage

is the minimum of:

The Volatility Cap:

A per-market limit calculated from the historical volatility of the underlying rate. It ensures a trader's margin can cover a worst-case (99% VaR) move.

The Liquidity Cap: A platform-wide limit that ensures the protocol's total loss-absorption capacity (LP Vault + Insurance Fund) is sufficient to cover an aggregate worst-case loss across all open positions.

This dual-cap system ensures that leverage is extended responsibly, aligning risk with the protocol's real-time capacity.