# Liquidation Discount

To expedite the liquidation of all positions, certain factors are considered to incentivize liquidators to act swiftly. The magnitude of the discount is determined by two factors:

1. **Time:** The duration since the position became liquidatable. The discount grows at an approximate rate of 1% every 60 seconds. This results in an additional discount of around 10% after 10 minutes have passed. The discount rate of time factor is capped at 30%, or around 30 minutes. 

$$
\text{TimeDiscount} = \min(0.3, \text{t} / 100)
$$

> $$\text{t}$$ = # minutes since position is marked as liquidatable

2. **Debt Ratio:** How unhealthy the position is. The aim is to provide greater incentives for the liquidation of positions that are riskier of going underwater. Each asset/strategy has its own MinDesiredHealthFactor (MDHF) which is the factor that determines whether the position is underwater and is used to calculate the discount amount using the following formula:

$$
\text{HealthDiscount} = \max\left(0,\frac{1 - \text{HF}}{1-\text{MDHF}}\right) \text{, when HF < 1}
$$

> $$\text{HF}$$ = Health Factor = 1 / Debt Ratio
>
> $$\text{MDHF}$$ = Min Desired Health Factor

In summary, by including both the time factor and health factor together. The total liquidation bonus is determined by the following formula

$$
\text{LiquidationDiscount} = 1-  (1-\text{TimeDiscount})  \cdot (1 - \text{HealthDiscount})
$$

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