Liquidation Process

When a vault's collateralization ratio falls below the minimum required level:

  1. The vault is considered undercollateralized and subject to liquidation.

  2. A portion of the collateral is auctioned off to cover the outstanding debt and associated liquidation fees.

  3. The liquidation penalty (Liquidation Fee) is added to the vault's total outstanding YU debt.

  4. Additional collateral is sold to cover this increased debt.

These carefully calibrated risk parameters work together to mitigate market risks by defining clear collateralization and liquidation rules. Users can monitor these parameters on their vault detail pages to manage their positions effectively and avoid liquidation scenarios.

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