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Health Factor

The ratio between risk-adjusted collateral value and outstanding debt inside a Borrow Spoke.

Overview

Health factor measures the relationship between risk-adjusted collateral value and outstanding debt inside a Borrow Spoke. Adjusted collateral value already includes Avana's LP valuation, collateral factors, pool-level risk treatment, and recoverable-value assumptions.

If health falls below the liquidation boundary, the position becomes eligible for liquidation. See the Liquidation Framework for what happens next.

Calculation

Health is computed per Borrow Spoke. The numerator is adjusted collateral value — already discounted through reconstruction, pricing, collateral factors, and recoverable-value assumptions.

healthFactor = adjustedCollateralValue / outstandingDebt

If a user has collateral in more than one Borrow Spoke, each spoke computes health independently. Extra margin in one market does not cover a deficit in another.

Monitoring Bands

Healthy: collateral stays comfortably above debt, with room for normal market movement.

Watchlist: the account still passes checks, but the buffer is thin. Consider repaying, adding collateral, or reducing exposure.

Liquidatable: health has crossed the liquidation threshold. The recovery path can begin.

Interface warnings may appear earlier than the hard liquidation threshold to give users time to act.

Response Path

When health weakens, the borrower can repay debt, add approved LP collateral, or take other actions that improve the account under the spoke's health checks.

Once health crosses the liquidation boundary, liquidators can unwind the required collateral path to restore solvency according to the market's liquidation rules.

User Actions

  • Borrowing more reduces health because debt rises against the same collateral.
  • Repaying debt improves health immediately.
  • Adding approved collateral can increase headroom if the spoke accepts and values it.
  • Claiming fees, withdrawing collateral, or changing positions can reduce health — check the post-action state first.

See Collateral Factors for how adjusted collateral value is calculated.