> For the complete documentation index, see [llms.txt](https://docs.townsq.xyz/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.townsq.xyz/automated-loop-vaults/leverage-higher-yield-with-your-yield-assets.md).

# Leverage higher yield with your yield assets

TownSquare's Leveraged Yield Vaults (Loop Vaults) enable higher, super competitive yields for existing yield-bearing assets for correlated asset pairs.

*\*Leverage amplifies losses. Depeg, oracle failure, and liquidity shortfalls can cause liquidation and loss of principal.*

The Yield Vaults are an implementation of ERC-4626 in the EVM. The asset strategy exeuction is as follows:

* Initiate Leveraged Position
  * Users deposit collateral (e.g., PT-LST of asset x) into Loop Vaults to initiate leverage.
* Borrow Liquidity
  * Loop Vaults borrow correlated assets (e.g. asset x) from the Crosschain Money Market, subject to collateral factors.
* Increase exposure
  * Use the borrowed asset to acquire more of the PT of the asset to increase yield, requiring the borrow cost be lower than the PT yield.
* Position Management & Risk Mitigation
  * Health Factor: Ensures adequate collateralization.
  * Price Oracles: Feed real-time asset prices from the fixed rate asset protocol (e.g. Pendle, RateX)
  * Liquidation: Triggered if the health factor falls below the threshold; liquidators repay debt and claim collateral with a bonus.
  * Users can add collateral or repay loans to maintain safety.
* Close Position
  * Vault unwinds strategy, repays borrowed amount plus interest, and returns remaining assets (profit/loss) to the user.