> For the complete documentation index, see [llms.txt](https://docs.aladdin.club/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.aladdin.club/f-x-protocol-new/f-x-2.0/risk-management.md).

# Risk Management

**Risk Management Framework:**

* Real-time monitoring of xPOSITION leverage and collateralization ratios, triggering rebalancing or liquidation as needed.

**Real-Time Leverage Fluctuations:**

* Market volatility and user actions affect leverage ratios, with dynamic adjustments by the protocol.

**Rebalance and Liquidation Triggers:**

* Threshold-based triggers initiate rebalancing or liquidation to maintain system stability.

**Reserve Fund and Bad Debt Redistribution:**

* Reserve funds enhance risk resistance; under-collateralized debt is proportionally distributed across active positions if reserves are insufficient.

**Recapitalization:**

* When the total collateralization ratio falls below 100%, the protocol halts new xPOSITION openings and utilizes protocol assets to restore the fxUSD peg.