# Risks A non-exhaustive list of risks associated with OPAL V3 vaults. For risks associated with crypto assets in general, please visit: ### Liquidation Risk OPAL vaults hold leveraged positions on external lending markets. If the value of collateral declines relative to debt, or if the lending market's liquidation parameters change, the position may be partially or fully liquidated. `OpalManager` monitors live health metrics (`currentLtv()`, `healthFactor()`) from each adapter and can trigger corrective rebalances to reduce leverage before a liquidation threshold is reached. However, automation infrastructure outages, extreme market conditions, or oracle failures may result in liquidation before corrective action can be executed. ### Third-Party Risks OPAL vaults integrate with external protocols including Aave V3, Morpho, Euler, Pendle, and DEX aggregators. Each integration introduces dependency on the security, availability, and correct functioning of third-party smart contracts. A vulnerability or outage in any integrated protocol may affect OPAL vault operations and share value. ### Interest Rate / Liquidity Risk The yield generated by a leveraged PT vault depends on the spread between the PT discount rate and the borrow cost. If borrow rates rise above the PT discount rate, the vault's net yield may become negative. Extended periods of negative yield spread will reduce the share price. Borrow liquidity on lending markets is not guaranteed. In periods of high utilisation, the vault may be unable to increase leverage, reduce leverage, or execute rollovers until liquidity conditions improve. ### PT Maturity and Rollover Risk This risk is specific to Perpetual PT Vaults and does not apply to V2 lov-Token vaults. When a PT position approaches maturity, the vault must roll the position to the next available PT market. The rollover is executed as an atomic managed rebalance. Risks include: * **Rollover delay.** The time between PT maturity and rollover execution is not instant. During this window, the vault may hold spot assets rather than a leveraged PT position, resulting in lower yield. * **New PT market availability.** If no suitable next-maturity PT market exists (insufficient liquidity, unfavourable pricing, or no Pendle market listed), the rollover may be delayed or the vault may temporarily hold a non-leveraged spot or supply position on a money market which may provide lower or no yield. This does not affect redemption rights; only the composition of the vault at the time of share redemption. * **Rollover slippage.** The swap from expiring PT to the new PT market may incur slippage, particularly in thin markets. The bundle-level balance sheet assertion mitigates extreme slippage by reverting the rollover if the post-operation state falls outside expected ranges. In most cases, the slippage will revert to the nominal range once market volatility subsides. ### Smart Contract Risk OPAL smart contracts have undergone independent security audits. However, no audit can guarantee the absence of vulnerabilities. Users should consider smart contract risk as part of their overall risk assessment. See Audits for the full list of completed audits: --- # 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://docs.origami.finance/the-third-fold-opal/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.