Liquidation Penalty
Rationale for Liquidation Penalty values
Goals:
- liquidation is lucrative for liquidator,
- liquidation improves health of the borrower;
Given
for
- deposited asset A worth of d with collateral factor,
- borrowed asset B worth of b with liquidation threshold
Liquidation starts when
Upon liquidation of portion
of B with penalty
, health must increase:
is the condition for liquidation to increase health. Given
is then a safe condition for liquidation penalty for any asset.