> For the complete documentation index, see [llms.txt](https://docs.fira.money/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.fira.money/security-and-risk/risk-framework/liquidation-risk.md).

# Liquidation Risk

## Core Risk

Borrowing on Fira, whether in fixed-maturity or floating-rate markets, requires collateral and carries material liquidation risk. Liquidations can proceed rapidly, automatically, and without notice, potentially resulting in substantial or complete loss of collateral holdings.

## How Liquidations Occur

Positions become vulnerable when a borrower's Loan-to-Value (LTV) ratio exceeds the Liquidation LTV (LLTV) threshold. This triggers eligibility for liquidators to seize collateral in exchange for debt repayment.

### Triggers

* Collateral value declines
* Borrowed asset appreciation
* Volatility shifts
* Pricing disruptions

## Real-World Scenarios

Liquidation materializes quickly in these circumstances:

* Sharp market movements
* Liquidity constraints
* Network congestion
* Oracle failures
* Cascading liquidations during broader market stress

## Mitigation Strategies (With Caveats)

Users may employ defensive tactics:

* Conservative initial leverage
* Active position monitoring
* Partial debt repayment
* Independent risk assessment

These are not guarantees. Interface warnings and any automated features provide indicative guidance only and may fail during stressed conditions.

## Fixed-Rate Maturity Risk

In fixed-rate markets, borrowers face an additional liquidation vector: **forced liquidation at maturity**. When collateral (BTs) reaches expiry, the DAO can force-liquidate all remaining positions — even healthy ones — to enable collateral redemption.

A **24-hour grace period** after maturity allows borrowers to repay before forced liquidation is triggered. Borrowers who do not close their positions before or during this window risk forced liquidation regardless of their health factor.

## Current Market Parameters

| Market Type   | Collateral | LLTV   | Max LTV | Penalty |
| ------------- | ---------- | ------ | ------- | ------- |
| Fixed-rate    | PT-USDe    | 90%    | 89%     | 3.1%    |
| Fixed-rate    | PT-sUSDe   | 90%    | 89%     | 3.1%    |
| Fixed-rate    | PT-USDG    | 94.75% | 94%     | 1%      |
| Floating-rate | wstETH     | 89%    | 87%     | 3.4%    |
| Floating-rate | cbBTC      | 90%    | 88%     | 3.1%    |

## Key Takeaway

Liquidation represents an inherent feature of collateralized borrowing. Users should not assume timely intervention opportunities exist during extreme volatility.


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