Risk parameters

Loan To Value

The maximum amount that can be borrowed for a specific mortgage is determined by the Loan To Value (LTV) ratio. For example, if the LTV is 75%, borrowers will be allowed to borrow 0.75 ETH worth of corresponding currency for every 1 ETH worth of collateral.
For a wallet, the maximum LTV is calculated as the weighted average of LTVs of collateral assets and their value. In particular, for a wallet that deposits the collateral assets that are worth in dollars
C1,,CnC_1, \dots ,C_n
, and their LTVs corresponding to
LTV1,,LTVnLTV_1, \dots , LTV_n
, maximum LTV is
C1×LTV1++Cn×LTVnC1++Cn\frac{C_1 \times LTV_1 + \cdots + C_n \times LTV_n }{C_1+\cdots+C_n}

Liquidation Threshold

The liquidation threshold is the percentage at which a position is defined as undercollateralised. For example, a Liquidation threshold of 80% means that if the value rises above 80% of the collateral, the position is undercollateralised and could be liquidated.
The difference between the Loan To Value and the Liquidation Threshold is a safety cushion for borrowers.
For each wallet, the liquidation threshold is calculated as the weighted average of the liquidation thresholds of the collateral assets and their value. In particular, for a wallet that deposits the collateral assets that are worth in dollars
C1,,CnC_1, \dots ,C_n
, and their liquidation threshold, respectively,
LT1,,LTnLT_1, \dots, LT_n
, the liquidation thresholds of wallet is
C1×LT1++Cn×LTnC1++Cn\frac{C_1 \times LT_1 + \cdots + C_n \times LT_n}{C_1 + \cdots + C_n}

Health Factor

For a wallet, these risk parameters enable the calculation of the health factor:
Hf=C1×LT1++Cn×LTnBH_f = \frac{C_1 \times LT_1+ \cdots + C_n \times LT_n}{B}
where
BB
is total borrows (in dollars),
C1,,CnC_1,\dots,C_n
is the values (in dollars) of collateral assets, and
LT1,,LTnLT_1, \dots, LT_n
is their liquidation threshold, respectively. When
Hf<1H_f < 1
the loan may be liquidated to maintain solvency.

Liquidation penalty

Liquidation penalty is a bonus applied to the price of collateral assets purchased by liquidators as part of the liquidation of a loan that has reached the liquidation threshold.

Reserve Factor

The reserve factor allocates a share of the protocol's interests to a collector contract as reserve for the ecosystem.
The following table is an example of the appropriate parameter for risk of the Tokens.
Reserve
Collateral
LTV
Threshold
Bonus
Reserve Factor
DAI
Yes
75%
80%
5%
10%
USDC
Yes
80%
85%
5%
10%
USDT
Yes
75%
80%
5%
10%
ETH
Yes
80%
82.5%
5%
10%
BNB
Yes
75%
80%
5%
15%
BTCB
Yes
70%
75%
9%
20%
BUSD
Yes
75%
80%
5%
10%
AAVE
Yes
70%
75%
5%
10%
ADA
Yes
70%
75%
5%
10%
CAKE
Yes
70%
75%
5%
20%
XRP
Yes
70%
75%
5%
20%
DOGE
Yes
55%
60%
8%
20%

Price Discovery

The frequency of price updates is determined by the liquidation strategy. We use a margin method, which means that prices are refreshed whenever the deviation exceeds a certain threshold. For the price feed, we rely on Chainlink's decentralized oracles.
Last modified 7d ago