# Risk parameters

<figure><img src="https://3987726685-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FGbB5NEhoy3EuFRP2zTTP%2Fuploads%2Ffde7ldG8JDYnQryVyduf%2FRisk%20parameters.png?alt=media&#x26;token=4edfd3b8-9cc9-4924-b459-3e35ff7310e3" alt=""><figcaption></figcaption></figure>

Each asset in Apollo Protocol has specific values related to its risk, which influences how it can be deposited and borrowed.

The table below illustrates a summary of the latest parameters for each asset.

| Symbol | Collateral | Loan To Value | Liquidation Threshold | Reserve Factor |
| ------ | ---------- | ------------- | --------------------- | -------------- |
| ETH    | Yes        | 80%           | 85%                   | 10%            |
| DAI    | Yes        | 80%           | 85%                   | 10%            |

### Loan-to-Value

The Loan-to-Value indicator (LTV) defines the maximum amount of an asset that can be borrowed based on the collateral provided by the borrower.

{% hint style="info" %}
\
The maximum LTV is calculated as the weighted average of collateral assets multiplied by each LTV:

$$Max LTV = \frac{ \sum{Collateral\_i : in : USD : \times : LTV\_i}}{Total : Collateral : in : USD :}$$
{% endhint %}

### Liquidation Threshold

Liquidation Threshold is the percentage by which a position is defined as collateral deficient. For instance, Liquidation Threshold of 80% means that if the position value rises over 80% of the collateral, the position is collateral deficient. Then the asset might be liquidated.

{% hint style="info" %}
Liquidation Threshold is calculated as the weighted average of collateral assets multiplied by each Liquidation Threshold:

$$Liquidation : Threshold= \frac{ \sum{Collateral\_i : in : USD : \times : Liquidation : Threshold\_i}}{Total : Collateral : in : USD :}$$
{% endhint %}

### Health Factor

As we covered in the [Borrowing](https://apollo-protocol.gitbook.io/apollo-protocol/function/borrowing) section, the Health Factor (HF) is utilized to assess the safety of a deposited asset in relation to a borrowed asset.\
\
For each wallet, Health Factor(HF) is calculated using these risks parameters:

$$HF = \frac{ \sum{Collateral\_i : in : USD : \times : Liquidation : Threshold\_i}}{Total : Borrows : in : USD}$$

When $$HF < 1$$ the asset may be liquidated to maintain solvency.

Let's consider a simple case below:

![](https://3987726685-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FGbB5NEhoy3EuFRP2zTTP%2Fuploads%2FSGWDLHY7CTgNUrNuv8on%2Fexample.png?alt=media\&token=b82b88bd-34ca-481b-95bc-be1266359127)

**Given**

One user deposited 100 USDC and borrowed 0.029 WETH.

Converting these to USD respectively, we get Collateral: $100, Borrowed: $72.5.

So Health Factor is,

$$HF=100\*0.85/72.5=1.17241379$$

**When**

Let's say the price of USDC dropped down to $0.8.

In this case, we get Collateral: $80, Borrowed: $72.5.

So Health Factor becomes,

$$HF=80\*0.85/72.5=0.937103$$

HF = 80 \* 0.8 / 72.5 = 0.937931

### Reserve Factor

The Reserve Factor (RF) allocates a portion of the protocol's interests (loan repayments and liquidations), to boost the reserves and support the development of the Apollo protocol.

It is adjusted based on the risks of the asset. For example, stablecoins are assumed as less risky assets with low reserve factors while volatile assets are assumed to have more risks with higher factors.

60% of the value allocated by the Reserve Factor will be used for buyback of APOLLO tokens and storing them in the treasury, 20% will be used for buyback of CERES tokens, and the remaining 20% will go to the developers.