Definition
Redemption risk is the possibility that a holder cannot exchange an investment or token with its issuer at the expected time, value or amount.
Why a redemption can be delayed or limited
Redemptions depend on the product's available liquidity and operating terms. Large requests, illiquid underlying assets, market closures, system downtime or product-level controls can affect when a request is processed.
Some products also require onboarding, identity checks or jurisdictional eligibility before a holder can redeem directly. These requirements differ by issuer and should be checked in the applicable product documents.
Redemption and secondary trading are separate exits
A transferable token may trade on a secondary market even when its holder cannot redeem directly with the issuer. Conversely, a product can provide issuer redemption while having limited secondary-market liquidity.
The expected redemption value can also differ from the price available through an exchange or liquidity pool.
What it does not mean
Redemption risk concerns the issuer or product redemption process. Market-liquidity risk concerns whether the holder can sell to another participant at an acceptable price.
Where this term fits
Questions about redemption risk
- Does token transferability guarantee redemption?
- No. A token can be transferable while direct redemption remains restricted by eligibility, timing or product terms.
- Is redemption always processed at NAV?
- No. The applicable value can depend on the product formula, valuation time, fees and governing documents.
- Does daily redemption eliminate redemption risk?
- No. A daily schedule describes normal availability. Liquidity constraints, operational events and product rules can still affect execution.
See these concepts in context
Review the Fensory MCP connection, tools and account controls.