> For the complete documentation index, see [llms.txt](https://docs.axis.to/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.axis.to/risk/market-trading-risk.md). # Market & Trading Risk Axis earns yield by capturing basis dislocations that open up across trading venues and across related assets, **its structural edge is cross-venue and cross-asset fragmentation**, a durable, market-neutral yield source that does not rely on any single mechanism, while offsetting directional exposure so the position is not a bet on price direction. Funding is one component (and can be the larger share in a given period); see the Transparency Dashboard for current attribution. Market-neutral arbitrage, capturing price differences while hedging out market direction, is an established institutional trading strategy, not a crypto invention. Its core risk is that the two sides do not behave or execute as expected: the fragmentation that produces the spread can narrow, fail to converge, or move against the position before it is realized. ## Main failure modes ### Basis risk The dislocation between the two legs, the same or related exposure priced differently across venues or assets, can widen, persist, or structurally change instead of converging. Because the return comes from these fragmentation spreads closing, a basis that stays open or inverts is a direct drag on realized yield. ### Execution risk One leg can fill before the other, fill only partially, or execute with more slippage than expected. Latency and failed orders can leave temporary directional exposure. Capturing a cross-venue spread means acting on two or more venues at once, so any leg that lags erodes or reverses the spread the trade was meant to lock in. ### Liquidity risk Displayed liquidity can disappear under stress. A position that appears small relative to normal volume can become expensive or impossible to close when many participants seek the same exit. Fragmentation across venues also means depth is split, so the liquidity available to unwind a leg can be thinner than aggregate figures suggest. ### Financing and carry cost risk Funding rates, borrow costs, fees, and rebates can change while a position is open. These are costs carried against the fragmentation spread, not the source of the return, but they still matter: a positive quoted spread can become negative after realized costs. Because the durable edge is fragmentation across venues and assets rather than any single mechanism, adverse funding is a cost to be managed rather than a collapse of the yield engine. ### Model and data risk Price, volume, funding, and venue data can be delayed, wrong, or incomplete. Automated signals can act on a bad input or fail to capture a regime change, including one where cross-venue and cross-asset relationships that normally hold break down. ## Control layers The risk framework calls for: * pre-trade liquidity and spread analysis across the relevant venues and assets; * identified hedge instruments and multi-venue liquidity; * automated monitoring drivers and integrity checks; * documented volume and spread evidence; * controlled transfer operations; * asset and venue exclusion when required evidence fails; * staged reduction or exit as conditions deteriorate. The exact risk limits and triggers are not public. A control framework can lower the probability or impact of a failure, but it cannot ensure that every hedge remains available or that every exit completes at the expected price. ## What delta-neutral means here Offsetting delta reduces exposure to a broad directional move at a point in time. Delta can change, and the position remains exposed to basis, liquidity, execution, financing, venue, counterparty, and operational risks. The return is earned from fragmentation spreads converging, not from price going a particular direction, and "delta-neutral" should never be read as "lossless." --- # Agent Instructions This documentation is published with GitBook. GitBook is the documentation platform designed so that both humans and AI agents can read, navigate, and reason over technical content effectively. Learn more at gitbook.com. ## 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. 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