> For the complete documentation index, see [llms.txt](https://constant-finance.gitbook.io/docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://constant-finance.gitbook.io/docs/introduction/concepts/risk-parameters-and-position-health.md).

# Risk Parameters and Position Health

Position health compares the current debt value with the risk-adjusted value of registered collateral. This comparison determines whether collateral can be removed and whether a Position can be liquidated.

## Inputs to Position Health

```mermaid
flowchart LR
    C[Collateral balances<br/>and NFT positions] --> V[Oracle valuation]
    O[Debt principal<br/>and accrued interest] --> V
    T[Collateral liquidation<br/>thresholds] --> V
    V --> H[Position health]
    H --> A[Healthy]
    H --> L[Liquidatable]
```

The calculation uses:

* the current amount and oracle value of each collateral asset;
* the liquidation threshold assigned to each collateral asset;
* the remaining debt principal;
* accrued borrower interest; and
* the current oracle value of each debt asset.

Health is not fixed when the Position opens. It changes as prices move, interest accrues, collateral is added or removed, and debt is repaid.

## Risk Parameters

| Parameter             | What it controls                                                              | Effect on the user                                                            |
| --------------------- | ----------------------------------------------------------------------------- | ----------------------------------------------------------------------------- |
| Collateral whitelist  | Whether an ERC-20 asset or LP NFT collateral key is accepted                  | Unsupported collateral cannot be registered in a Position                     |
| LTV                   | A stored collateral parameter intended to describe an opening-borrow boundary | The current Position path does not enforce it as a separate opening limit     |
| Liquidation threshold | The portion of collateral value counted toward the health boundary            | A higher threshold supports more debt value against the same collateral value |
| Liquidation bonus     | Additional collateral value permitted as liquidator compensation              | Affects how much collateral may be exchanged for repaid debt                  |
| Protocol fee rate     | The share of borrower-rate economics retained by the protocol                 | Creates the difference between fixed borrower and supplier rates              |
| Oracle price          | The external price used to value debt and collateral                          | An incorrect price can produce an incorrect health assessment                 |
| Maximum price age     | The accepted freshness limit for a configured price feed                      | A feed that is too old cannot provide a valid valuation                       |

## Weighted Liquidation Threshold

A Position can hold several collateral assets, each with a different liquidation threshold. Constant Finance calculates one effective threshold by weighting each asset's threshold by its current USD value.

Assets with more value contribute more to the result. Because these weights depend on current prices, the effective threshold can change even if the collateral quantities stay the same.

## Current LTV Boundary

{% hint style="info" %}
The Config stores LTV values for supported ERC-20 and LP NFT collateral. The current Position initialization and ongoing health paths, however, use the weighted liquidation threshold rather than a separate, stricter opening-LTV limit.

For that reason, this documentation does not present the current LTV values as an independently enforced maximum opening ratio. The complete live Sepolia Config remains available in [Risk Configuration](/docs/introduction/deployment/risk-configuration.md).
{% endhint %}

## Position States

| State             | Meaning                                                                         |
| ----------------- | ------------------------------------------------------------------------------- |
| Healthy           | Debt remains within the current risk-adjusted collateral boundary               |
| Near the boundary | A price change or further interest accrual could make the Position liquidatable |
| Liquidatable      | The Position is unhealthy, or it has passed maturity with debt remaining        |
| Closed            | All debt is cleared and the Position no longer accrues interest                 |

A partial liquidation is not guaranteed to restore an unhealthy Position to health. Users and liquidators should always check the Position again after the transaction.

## Configuration Versioning

Each Position binds the Config selected when it is created and continues to use that Config for collateral parameters and fees. If the Position Builder later selects a new Config, only future Positions use it.

Positions created at different times may therefore operate under different Config addresses.

## Trust Boundaries

* **Oracle administration** controls price-feed selection, token decimals, and accepted price age.
* **Config construction** defines collateral support, thresholds, bonuses, and fee rates for the Positions that use it.
* **Position Builder administration** selects the Config for future Positions but cannot rewrite the Config of an existing Position.
* **Gateway administration** controls routing and execution permissions for new requests.
* **External liquidators** choose how to execute a liquidation but cannot bypass the Position's final checks.

Isolated Positions reduce risk propagation between loans. They do not remove oracle risk, collateral-liquidity risk, or operational configuration risk.