Port Finance
  • šŸ“ŠIntroduction to Port Finance
  • šŸ“–Deposit and withdrawal
  • šŸ“–Borrow
  • šŸ’±Variable Rate Lending
    • Terminologies
    • Protocol Math
    • Risks & Parameters
    • Fees
    • Interest Rate Curve
    • Liquidation
  • šŸ’°Fixed Rate Lending
    • Principal Tokens and Yield Tokens
    • Arbitrage Opportunities
    • Principal Token Trading Venues
  • šŸ”Security
    • Bug Bounty
  • šŸ‘Øā€šŸ’»Developers
    • Developer Resources
    • Interacting with Port Finance via Rust
  • šŸŖ™Tokenomics
    • Tokenomics
  • šŸ”—Community Links
    • Community Links
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  1. Variable Rate Lending

Liquidation

PreviousInterest Rate CurveNextPrincipal Tokens and Yield Tokens

Last updated 3 years ago

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Liquidation occurs when a user's total borrow has reached a threshold, i.e. the risk factor is greater than or equal to 100%.

RiskFactor=Ī£borrowMarketValueborrowĪ£collateralLiquidationThresholdcollateralāˆ—MarketValuecollateralRiskFactor = \frac{ \Sigma_{borrow} MarketValue_{borrow}}{ \Sigma_{collateral} LiquidationThreshold_{collateral} * MarketValue_{collateral}} RiskFactor=Ī£collateral​LiquidationThresholdcollateralā€‹āˆ—MarketValuecollateral​Σborrow​MarketValueborrow​​

Risk factor represents the overall liquidation risk for a given users. When the users add more collateral into the protocol, the risk reduces. Conversely when the users borrow more, the risk increases.

When a user has reached its liquidation threshold, up to 50% (in terms of market value) of the total borrowed asset is sold to the liquidator at a discounted price to repay a portion of the loan.

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