Asset Risk

Each asset in the Parallel protocol has specific parameters that influences how they can be supplied and borrowed.

  • Collateral - Can this asset be used as collateral against which to borrow?

  • Collateral Factor (CF) or Loan-to-Value (LTV) - What is the maximum amount that can be borrowed? It is represented as a % with numerator equal to Max Amount Borrowed/Value of Supplied AssetMax \ Amount \ Borrowed/Value \ of \ Supplied \ Asset. We will often refer to this value as Collateral Factor and abbreviate as CFCF.

  • Liquidation Threshold (LT) - This represents the point when the asset would start to go through the liquidation process. It is represented as a % with numerator equal to Total Debt/Value of AssetTotal \ Debt/Value \ of \ Asset. The difference between the CF and Liquidation Threshold can be considered as the safety cushion for borrowers.

  • Liquidation Bonus - The amount of additional collateral that liquidators receive / are discounted for purchasing assets on liquidation. Represented as percentage of the collateral purchased.

  • Supply Cap - The maximum amount in a given token which Parallel will support as deposit. This parameter limits potential concentration risk in a given asset where Parallel controls an outsized proportion of its total circulating supply. We target approximately 1% of total circulating supply of riskier assets.

  • Borrow Cap - The maximum amount in a given token which Parallel will allow to be borrowed. If Borrow Cap is below Total Debt in a given token there will be no forced liquidation but no new borrow positions may be opened.

For each wallet the maximum CF is calculated as the weighted average of the CF's of the collateral assets and their value:

CFAccount=i=1iCollateraliinETH×CFiTotalCollateralinETHCF_{Account} = \frac{ \sum^i_{i=1}{Collateral_i \: in \: ETH \: \times \: CF_i}}{Total \: Collateral \: in \: ETH \:}

For each wallet the Liquidation Threshold is calculate as the weighted average of the Liquidation Thresholds of the collateral assets and their value:

LiquidationThreshold=i=1iCollateraliinETH×LiquidationThresholdiTotalCollateralinETHLiquidation \: Threshold= \frac{ \sum^i_{i=1}{Collateral_i \: in \: ETH \: \times \: Liquidation \: Threshold_i}}{Total \: Collateral \: in \:ETH\:}

The table below shows a summary of the latest values:

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