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# Important Parameters

#### Collateral Factor

The collateral factor of collateral t defines the maximum ratio of USP that can be borrowed, given the collateral value. This value should reflect the risk of the underlying token of the collateralized LP token, where a more stably priced token with less price risk should be allowed a higher ratio. It is denoted and with the interval set as
$Collateral Factor t ∈ (0, 1)$
This variable can be configured from protocol governance.

#### Liquidation Threshold

The liquidation threshold of collateral t defines the percentage of which a position would be defined as under-collateralized and open to liquidation.
$Threshold t ∈ (Collateral Factor t , 1)$
This variable can be configured from protocol governance.

#### Collateral Value

The collateral value of token t and address a is calculated from the amount of LP token to be collateralized, factored by the coverage ratio:
$Collateral value t,a = Pool liability t LP token supply t × Underlying token price t × Amount of LP tokens a$
where the underlying token price is fetched from Chainlink.

#### Borrowing Limit

The borrowing limit of collateral t of address a is a calculated value that defines the maximum amount of USP to be borrowed. Please note that each address can only open one position per collateral type. Each position would contain precisely one collateral type.
$Borrowing Limit t,a = Collateral value t,a × Collateral Factor t$

#### Liquidation Limit

The liquidation limit of collateral t of address a is a calculated value that defines the upper boundary of borrowed USP amount. Positions with borrowed USP amounts greater than this limit will be flagged as open to liquidation.
$Liquidiation Limit t,a = Collateral value t,a × Liquidation Threshold t$

#### Health Factor

The health factor of collateral t of address a is the indicator of its collateralization level, calculated by the value of the borrowed USP and the liquidation limit of collateral. Users can use this to determine the risk of liquidation of a particular position. Health factors close to 1 are risky, and lower than 1 indicates the position can be liquidated.
$Health Factor t,a = Liquidation Limit t,a / Borrowed USP amount t,a$
Please note that the borrowed USP amount includes the accrued stability fee over time.