Exercise 10: Risk Management Framework Design

⏰ Time Investment: 60-90 minutes 🎯 Goal: Design comprehensive risk management framework

📚 Required Reading Integration 📖 Primary: Lesson 10: Risk Management and Hedging 📖 Supporting: Lesson 3: Risk Management Fundamentals

📊 Phase 1: Portfolio Diversification (20 minutes)

Exercise 1: Design portfolio allocation

Total Capital: $_____

By Protocol:

• Aave: $_____ (_____%)

• Morpho: $_____ (_____%)

• Euler: $_____ (_____%)

• Other: $_____ (_____%)

By Strategy:

• Supply only: $_____ (_____%)

• Moderate leverage: $_____ (_____%)

• Aggressive: $_____ (_____%)

Rationale: _________________________________

Portfolio Allocation Template

🛡️ Phase 2: Risk Assessment Matrix (25 minutes)

Exercise 2: Create risk scoring

Evaluate each position:

Position	Protocol Risk	Collateral Risk	HF	Liquidity Risk	Total Score
Position 1	___/5	___/5	___	___/5	___/5
Position 2	___/5	___/5	___	___/5	___/5

Risk thresholds:

• < 2.0: Acceptable

• 2.0-3.0: Monitor closely

• 3.0: Reduce or exit

Risk Assessment Matrix Template

📈 Phase 3: Hedging Strategy (20 minutes)

Exercise 3: Design hedging approach

Current exposure: _________________________________

Hedging strategy:

• Percentage to hedge: _____%

• Method: _____ (stablecoin reserve/options/futures)

• Rationale: _________________________________

🚨 Phase 4: Emergency Procedures (25 minutes)

Exercise 4: Document exit procedures

Triggers for exit:

1. HF < _____

2. Protocol exploit: _____

3. Collateral depeg: _____%

4. Other: _________________________________

Exit plan:

1. Immediate action: _________________________________

2. Funds needed: $_____

3. Time to execute: _____ minutes

4. Backup plan: _________________________________

Emergency Exit Plan Template

✅ Framework Completion

• Diversification plan created

• Risk matrix developed

• Hedging strategy defined

• Emergency procedures documented

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