Liquidation Execution

In Leveraged Volatility Farming (LVF), user positions are collateralized by LP tokens composed of a deposited pTKN and a borrowed paired asset. These LP tokens serve as both the yield-bearing position and the collateral backing the loan. Once the position’s Loan-to-Value (LTV) exceeds 83.33%, it becomes eligible for liquidation.

Liquidation is permissionless and atomic, meaning a third party may repay any amount of the outstanding debt and receive 110% of the repaid amount in collateral. The 10% bonus comes directly from the borrower’s equity.

Importantly, liquidators are not required to close the entire position. If slippage or LP depth would make a full liquidation unprofitable, they may choose to execute partial liquidations, seizing only as much collateral as is profitable in that moment. This makes liquidation behavior responsive to real-time market conditions and reduces the risk of cascading price impact.

Example — Full Liquidation at Threshold

Metric	Value
Total Collateral Value	$10,000.00
Max LTV	83.33%
Debt at Liquidation	$8,333.00
Liquidator Repays	$8,333.00
Liquidator Receives	$9,166.30
Liquidator Profit	$833.30
Borrower Retains	$833.70
Borrower Equity Lost	50%

Formula Summary

• Max Debt = Collateral × 83.33%

• Liquidator Reward = Debt Repaid × 110%

• Remaining Collateral = Total Collateral − Liquidator Reward

• Borrower Equity Lost (at threshold) = 50%