> 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/iii.-using-tydro/health-factor-+-position-management.md). # Health Factor + Position Management Overview of managing borrow positions on Tydro ## Health Factor A health factor above 1 means a position is solvent. A health factor below 1 means the collateral no longer covers the debt at the required threshold, and the position becomes eligible for liquidation. $$ \text{Health Factor} = \frac{\sum \left( \text{Collateral} \times \text{Liquidation Threshold} \right)}{\text{Total Debt}} $$ The health factor moves continuously as asset prices update through oracle feeds. A position that is healthy can become eligible for liquidation if collateral prices fall, borrowed asset prices rise, or interest accumulation. ### Liquidation threshold vs. LTV These two parameters are distinct: * **Loan-to-value (LTV)** is the maximum that can be borrowed when opening or adding to a position. It sets the starting limit. * **Liquidation threshold (LT)** is the point at which an existing position becomes eligible for liquidation. It is always higher than the LTV. The gap between LTV and LT is the safety buffer. Borrowing at the LTV limit leaves no room for price movement before the LT is breached. Prudent borrowing means leaving space between the actual borrow and the LTV. ### When liquidation is triggered When a position's health factor drops below 1, any address may act as a liquidator. The liquidator repays a portion of the outstanding debt and receives a corresponding amount of collateral in return, plus a liquidation bonus. The liquidation bonus compensates the liquidator for taking on the position. The protocol fee is deducted from the bonus and routed to the protocol reserve, so the liquidator receives the bonus minus the fee. ### Liquidations in clusters In a cluster, margin is shared across correlated assets. A price decline in any cluster asset lowers the health factor of the whole cluster position, not only the position tied to that specific asset. When the health factor falls below 1, collateral from any asset in the cluster may be seized in liquidation. See [Clusters and Pooled Markets](/ii.-core-concepts/markets/clusters-and-pooled-markets.md) for how shared margin works. ### Avoiding liquidation The most reliable way to avoid liquidation is to borrow well below maximum borrowing capacity and monitor the health factor as prices move. **Practical steps:** * **Borrow conservatively.** Borrowing at the LTV limit leaves no buffer, and a modest price move is enough to breach the liquidation threshold. Leave a meaningful gap between debt and the LTV limit. * **Monitor the health factor.** The HF updates continuously with oracle prices. * **Add collateral.** Supplying more collateral raises the health factor without requiring any part of the position to close. * **Repay debt.** Reducing outstanding debt raises the health factor directly. ### Oracle prices and liquidation timing Liquidation eligibility is determined by on-chain oracle prices, not exchange prices. A position becomes liquidatable the moment its health factor drops below 1 according to the oracle feed. Price latency between the oracle and the broader market is a known risk. See Oracles and Market and collateral risk. ### Developer integration Liquidators interact directly with the Pool contract to repay debt and claim collateral. --- # Agent Instructions This documentation is published with GitBook. GitBook is the documentation platform designed so that both humans and AI agents can read, navigate, and reason over technical content effectively. Learn more at gitbook.com. ## Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter, and the optional `goal` query parameter: ``` GET https://docs.tydro.com/iii.-using-tydro/health-factor-+-position-management.md?ask=&goal= ``` `ask` is the immediate question: it should be specific, self-contained, and written in natural language. `goal` is optional and describes the broader end goal you are ultimately trying to accomplish on behalf of the user. GitBook uses it to tailor the answer towards what is most useful for that goal. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.