> For the complete documentation index, see [llms.txt](https://docs.tydro.com/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.tydro.com/ii.-core-concepts/risk-paramaters.md).

# 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](/iii.-using-tydro/health-factor-+-position-management.md).

### 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](/ii.-core-concepts/liquidations-and-risk-management.md).

### Supply and borrow caps

Caps limit the total that can be supplied or borrowed in a market.<br>

* 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](/ii.-core-concepts/markets.md) reference lists current figures.

| Parameter             | What it controls                  |
| --------------------- | --------------------------------- |
| 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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