> ## Documentation Index
> Fetch the complete documentation index at: https://docs.kamui.finance/llms.txt
> Use this file to discover all available pages before exploring further.

# Allocation Risk Management

> The eight-stage asset selection framework, composition rules, and continuous risk monitoring.

## Asset Selection Framework

Kamui's allocation process runs eight stages from sourcing through monitoring. Every position runs the full pipeline. Institutional underwriting is paired with named external risk providers at each gate.

### Underwriting layers

* **Off-chain due diligence:** institutional underwriting against an asset-class-specific scorecard covering team, portfolio, credit, governance, liquidity, token structure, and macro risk.
* **On-chain due diligence:** smart-contract architecture, token mechanics, oracle and custody pathways, upgradeability, and operational attack surfaces, complemented by external on-chain risk managers.
* **Ongoing risk management:** proprietary rebalancing engine running continuously; weekly and ad-hoc Risk Committee review; 24/7 off-chain and on-chain monitoring.

### Screening Filters

* Regular NAV updates and, preferably, sub-30-day redemption terms.
* Maximum composition caps for assets with longer redemption windows.
* Ethereum-mainnet deployment, a credible audit history, transparent teams, and adequate TVL and track record.
* Exclusion of direct equity and commodity holdings.

### Composition Rules

Each tier has hard constraints on eligible asset categories. The separation is structural, not cosmetic.

| Tier | Eligible Asset Categories |
| - | - |
| Stable (USDst) | US Treasuries, yield-bearing stablecoins, and money-market instruments only |
| Balanced (USDbd) | Private credit assets, yield-bearing stablecoins, and US Treasuries |
| Boosted (USDbt) | Diversified RWA credit: private credit, fixed income |

Vault construction rules require multiple assets per vault, blending liquidity with higher-yield exposure. Each vault is constructed to have assets with independent natures to reduce correlations. Per-vault concentration caps limit single-asset exposure.

## Risk Monitoring

### Continuous monitoring

24/7 monitoring and alerting is an automated process driven by AI agents watching on-chain activity and system health, tied to documented pause criteria: unexpected on-chain role or permission changes, abnormal outflows, and provider feed divergence or staleness.

### Response to underlying-asset stress

Daily NAV reflects asset stress as it occurs, so there is no stale marking. The selection framework is designed to screen out fragile structures: assets reliant on a single reserve-verification provider, or carrying hard withdrawal caps, are flagged and constrained before inclusion.

### Risk Posture

The vaults hold yield-bearing instruments. They are not directional trading strategies, so the primary risks are issuer and credit risk and liquidity risk, rather than market drawdown. These are addressed through careful asset construction, diversification across issuers, and the liquidity ladder. On-chain guardrails catch anomalous NAV movement at the contract level before it can affect settlement prices.

### Third-party assessment

Kamui is onboarding independent third-party risk assessment providers to publish asset-level risk reports and scores, including gating-risk factors.


This documentation is built and hosted on [Mintlify](https://mintlify.com), a developer documentation platform.