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.

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