Liquidation

Liquidation can occur when the value of the pVault falls below the minimum collateral value. All positions will be closed and fee of 20%(10% on Version 2.0.2) of the minimum collateral of the vault will also be lost. The vault is in danger and can be liquidated when the equation below becomes true.

$$Value_{pVault} \, = \, Collateral_{USDC} \, + \, \sum \, Positions \, PnL \, < Min. \, Collateral$$

Warning: The liquidation price displayed uses the index price of the asset, however the actual liquidation price can be different by a large amount at very high leverage because the liquidation conditions consider the trading price (including spread). Users must be very careful to manage the portfolio margin at high leverage ratios.

The Predy team is currently working on UI updates to estimate the liquidation prices more accurately, however exact prices cannot be known due to the calculation being affected by changes in market conditions.

When a vault is in danger, anybody (or any bot) can liquidate the vault, closing all positions. The liquidator receives a reward of 10% of the minimum collateral value and the protocol treasury also receives the same reward.

The equation below shows how the minimum collateral for a pVault is calculated.

$$\begin{align*} Min. \, Collateral = \ &α*S(|2S(1+FundingRate_{ETH^2})*Amount_{ETH^2} \\ &+(1+FundingRate_{ETH})*Amount_{ETH}| \\ &+ 2S*(1+FundingRate_{ETH^2})*|Amount_{ETH^2}|) \\ \\ &Min. \, Collateral = 200, \, if \ Min. \, Collateral < 200 & \\ &where: \\& S = Price_{ETH} \ from \ Chainlink \\& α = 5 \% & \\ \end{align*}$$