Understanding Aave Risk Parameters
Complete guide to Aave v3 risk parameters on Polygon. How LTV, liquidation threshold, reserve factor, and supply/borrow caps affect your position.
Loan-to-Value (LTV)
LTV determines maximum borrowing power per asset. On Aave v3 Polygon: USDC 82.5%, WETH 82.5%, WBTC 73%, DAI 75%. Higher LTV means more borrowing power but also closer liquidation threshold.
Liquidation Threshold
This is the percentage at which a position becomes liquidatable. For most assets: 83-88%. When borrows reach this percentage of collateral value, HF reaches 1.0. Always know your assets' thresholds.
Reserve Factor
The reserve factor determines how much of the protocol fee goes to Aave's treasury. On Polygon v3, this is typically 10-20% of interest paid. It doesn't directly affect your liquidation risk.
Supply and Borrow Caps
Aave v3 Polygon has supply and borrow caps to manage risk. If a cap is reached, you may not be able to supply or borrow that asset. Check caps before opening large positions.