Products > Perpetual Yield Tranches > Covered risks
Each Perpetual Yield Tranche is based on one or more yield sources, which are exposed to a set of dependencies and risks. Additionally, every PYT is subject to underlying strategy and Idle PYTs infrastructure risks.
In general, Senior PYTs holders always benefit from the payout priority (first in line to redeem their funds) after events that can cause a decrease in:
- the exchange rate between PYTs-managed yield-bearing tokens' and the underlying asset
- the exchange rate between PYTs tokens and the underlying asset
PYTs interact with a range of DeFi primitives, each with its own specific risks. Every primitive, though, share a number of common risks:
A list of specific risks affecting Automated Market Makers, Lending protocols, Liquid Staking protocols, Leveraged strategies and Options strategies follows.
Lending protocols are mainly classified into two categories based on the type of loans they offer: overcollateralized and undercollateralized.
NB - PYTs do not cover Senior LPs funds in case of events leading to a de-peg.