Risk Paramaters
How risk parameters impact markets
Loan-to-value (LTV)
LTV caps borrowing against a collateral asset, as a share of its value. A higher LTV allows more borrowing per unit of collateral and leaves a smaller buffer.
Liquidation threshold (LT)
LT is the point at which a position becomes eligible for liquidation, measured as a collateral ratio. The gap between LTV and LT is the buffer a borrower has before liquidation. See Health Factor + Position Management.
Liquidation bonus
The liquidation bonus is the discount a liquidator receives on collateral when closing part of an unhealthy position. It compensates liquidators for acting and is set per market. See Liquidations.
Supply and borrow caps
Caps limit the total that can be supplied or borrowed in a market.
Supply cap: the maximum amount of an asset the market accepts as deposits.
Borrow cap: the maximum amount of an asset that can be borrowed.
Caps contain concentration and let a market scale exposure in a controlled way.
Where values are set
Parameters are set per market and can be adjusted through governance within defined limits. On-chain values are authoritative; the Markets reference lists current figures.
LTV
Maximum borrow against collateral
Liquidation threshold
Liquidation eligibility point
Liquidation bonus
Liquidator's collateral discount
Supply cap
Maximum deposits in the market
Borrow cap
Maximum borrowing in the market
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