> ## Documentation Index
> Fetch the complete documentation index at: https://docs.axient.app/llms.txt
> Use this file to discover all available pages before exploring further.

# Loss allocation

> A deterministic order for recording eligible loss across capital classes.

# Loss allocation follows a defined order

When an eligible loss occurs, the reference design allocates it through
separate account classes in a pre-defined sequence. The purpose is to make the
result inspectable rather than discretionary.

## Principles

* Position-level collateral, cash, debt, and outcome-token balances are
  reconciled first.
* Junior backstop capital bears eligible losses before senior credit under the
  stated priority rules.
* Finite reserve capacity is accounted for independently and cannot be treated
  as unlimited insurance.
* Simultaneous eligible claims use exact integer allocation rules so the same
  inputs produce the same distribution.

<Note>
  The loss-allocation model is a reference accounting design. It does not
  eliminate loss or guarantee that capital will be available in any circumstance.
</Note>