Loan-to-value & liquidation threshold

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Loan-to-value​

The loan-to-value (LTV) is a ratio between the value of the loan and the collateral deposited. This ratio is usually expressed as a percentage. $$\color{white} \text{LTV} = \frac{\text{Loan value}}{\text{Collateral value}} \times 100$$ Each market has its own maximum LTV, which means borrowing more than a defined fraction of the collateral value is impossible. For example, in the situation where:

• Max_LTV = 85%
• Collateral_value = $1000

Then: $$\color{white} \text{Max borrowable} = 0.85 \times 1000 = \$850$$

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Liquidation threshold​

The liquidation threshold (LT) is the maximum ratio allowed between the value of the debt and the collateral deposited. If the LTV of a loan becomes superior or equal to the LT, the position can be liquidated. This ratio is usually expressed as a percentage. Each market has its own liquidation threshold.