Definition

Gap Risk Management

Meaning ⎊ The strategy of mitigating the risk of large, sudden price jumps that bypass standard risk management controls.
Greeks.liveMarch 14, 2026

Gap Risk Management

Gap risk management is the process of preparing for sudden, large price movements where the market price skips over certain levels, potentially bypassing liquidation or hedging triggers. In traditional markets, this happens overnight or over weekends; in crypto, it can happen at any time due to low liquidity or massive sell-offs.

Gap risk is a major challenge for derivative protocols because it can lead to losses that exceed the available margin, creating bad debt. Effective management involves stress testing for extreme scenarios, setting appropriate margin requirements, and utilizing insurance funds or circuit breakers.

It is the process of ensuring that a protocol can remain solvent even when the market moves in a way that traditional, continuous hedging models cannot account for. It is essential for the long-term sustainability of leveraged financial products.

Risk Management Regimes
Inventory Risk Management
Programmable Regulatory Logic
Risk Gap Management
Sentiment Divergence Indicators
Histogram Analysis
Basis Risk Propagation
Execution Delay