Health Factor

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In Astrolend, every account with open positions has a "Health Factor." This metric serves as a single value that reflects how well-collateralized your portfolio is. Essentially, the Health Factor measures the overall stability and safety of your borrowed and supplied positions, providing insight into the risk level and indicating whether any actions are necessary to avoid liquidation.

Health Factor Calculation

The Health Factor (A) is calculated using the following formula:

Where:

• assets_weighted: Represents the weighted value of all assets supplied by the user.

• liabilities_weighted: Represents the weighted value of all liabilities (i.e., borrowed funds) that the user has.

This formula calculates the difference between your weighted assets and liabilities, divided by the weighted assets. The resulting value is your Health Factor.

Understanding the Health Factor

• Range: The Health Factor typically ranges between 0% and 100%. However, it can theoretically go as low as negative infinity (-∞) if liabilities outweigh assets significantly.

• Risk Indicator:

  • A higher Health Factor indicates a safer, more stable portfolio, where the assets sufficiently cover the liabilities.

  • A lower Health Factor (approaching 0% or negative) indicates higher risk, where your liabilities are close to or exceed your assets. When your Health Factor reaches 0% or below, you are at risk of liquidation.

Managing Your Health Factor

To avoid liquidation on Astrolend, it is crucial to regularly monitor your Health Factor and maintain a buffer above the liquidation threshold. Here are a few strategies:

1. Regular Monitoring: Keep an eye on your Health Factor, especially if market conditions are volatile or if you've taken on significant borrowing.

2. Asset and Liability Weights: Understand the weighting applied to your assets and liabilities to better estimate your Health Factor. Different assets may have different risk profiles, affecting their weight in the calculation.

3. Stable Collateral: Consider using stablecoins as collateral due to their stable value, which can provide more predictable support to your Health Factor.

4. Utilize Tools: Leverage Astrolend’s tools and resources to make informed decisions about your positions and manage your portfolio's risk effectively.

By maintaining a safety buffer and Identifying the elements that affect your Health Factor, you can better protect your positions from liquidation and manage your portfolio more effectively.