Liquidations and Bad Debt

• The protocol liquidates positions whose PnL value is negative 95% in relation to their collateral.

• In the event of position's loses exceeding the collateral, the protocol liquidates the position and adjusts the vAMM internal virtual liquidity to ensure the market is always fully collateralised and can pay out all the traders.

• The protocol does not accumulate bad debt and ensures that there is no mismatch between realizable PnL and actual collateral backing the market.