How are LTV and Liquidation Threshold calculated for credit delegation on Aave to ETH v2 Market??
- Aave Protocol
- Aave liquidation Aave
I have some questions regarding credit delegation on Aave to ETH v2 Market. Let's say a delegator has supplied asset A and asset B and has delegated their credit power to another actor (the delegatee) for both assets.
In Case 1, the delegatee borrows USDC against asset A and USDT against B. I want to know how the final LTV (Loan-to-Value) and Liquidation Threshold are calculated in this case. Are they aggregated averages of both cases, or distinct for each case?
In Case 2, the delegatee borrows X USDC against asset A and Y USDT against asset B, using the same address to borrow funds for both Aave flashloans. Again, I want to know how the final LTV and Liquidation Threshold are calculated. Is it an aggregated average or distinct for each case?
It's important to get a clear understanding of how these values are calculated to ensure there is enough collateral to cover each loan individually. Thank you in advance for your help.
Answers 1
The health factor and liquidation threshold of the delegator would be a weighted average of both borrow positions (USDC and USDT). When you delegate credit and someone borrows against it, it’s no different than opening a borrow position on the delegators account.