> For the complete documentation index, see [llms.txt](https://tau-labs.gitbook.io/vault-dashboard/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://tau-labs.gitbook.io/vault-dashboard/tau-vaults/vault-types.md).
# Vault Types
TAU Labs currently runs the following distinct vault strategies:
🎯 Lending Optimizers
#### What they are
Lending optimizers are automated vaults that programmatically shift assets between different lending protocols and markets to capture the highest available yield within pre-defined risk parameters.
#### Typical risks
* Risk of bad debt determined by the quality of the collateral asset and market parameters (e.g. LLTV, liquidation penalty, oracle)
* Market risk of the asset supplied by the vault: This is the main asset the vault has exposure to.
* Illiquidity risk: Withdrawals on money markets may be limited during times of high utilization.
* Smart contract risk of all involved protocols and assets
🔄 Borrow Loops
#### What they are
Borrow loops are automated strategies that maximize yield or exposure by recursively depositing and borrowing the same (or correlated) assets to create leverage. By repeating this cycle, the vault effectively multiplies the principal amount, allowing the user to earn interest or farming rewards on a much larger position than their initial deposit.
The net yield is given by the yield on the collateral asset minus borrow costs.
#### Typical risks
* Liquidation risk: Price changes, even minimal due to looping, can result in liquidation. Correlation of collateral and debt asset prices and oracle design determine liquidation risk
* Interest rate risk: Collateral yield and borrow rates change based on market conditions and can turn net yield negative
* Market risk of asset looped: This is the main asset the vault has exposure to.
* Illiquidity risk: Delevering might be restricted by redemption windows of the loop asset. This can impact the availability of withdrawals and may prevent the vault from exiting quickly from negative net yield scenarios
* Smart contract risk of all involved protocols and assets
⚖️ Carry Loops
#### What they are
Carry loops are a special case of borrow loops. They add one leg before the looping by taking a non-loop asset in, borrowing against it, and then running the loop.
For example, a vault may take in WBTC, borrow a stablecoin against it, and then loop the stablecoin against another stablecoin.
#### Typical risks
The same risks as for the borrow loop apply. However, as there are now two borrow legs, complexity and therefore risk increases.
* Liquidation risk: Price changes, even minimal due to looping, can result in liquidation. Correlation of collateral and debt asset prices and oracle design determine liquidation risk
* Interest rate risk: Collateral yield and borrow rates change based on market conditions and can turn net yield negative
* Market risk of asset looped: This is the main asset the vault has exposure to.
* Illiquidity risk: Delevering might be restricted by redemption windows of the loop asset. This can impact the availability of withdrawals and may prevent the vault from exiting quickly from negative net yield scenarios
* Smart contract risk of all involved protocols and assets
🛡️ Fixed-Income
#### What they are
Strategies that allocate to fixed-rate instruments such as Pendle PTs, locking in fixed yields for defined durations. Upon PT maturity, vaults automatically roll-over allocations into new PTs.
#### Typical risks
* Market risk of assets underlying PTs
* Illiquidity risk: PTs have limited liquidity before maturity which can impact withdrawability.
* Smart contract risk of all involved protocols and assets
***
#### **Risk Spectrum**
While the different types of vaults come with unique risks, each vault type can also be designed along a risk spectrum. For instance, a lending optimizer prioritizing blue-chip collateral offers a lower risk profile than one that allocates to markets backed by new vault tokens.
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