Formula and accounting assumptions
Modeled repayment is the minimum of the requested amount, debt multiplied by the close factor, and available collateral divided by one plus the bonus. Total collateral debited equals repayment × (1 + bonus). The protocol fee is repayment × bonus × protocol share of that bonus. The liquidator receives the remaining seizure value. This model only permits repayment when the initial liquidation-adjusted health factor is below one.
Worked hypothetical example
Take $1,000 of debt, $1,200 of collateral and a 75% liquidation threshold. Initial health is 0.90. With a 50% close factor, a request to repay $700 is capped at $500. A 10% bonus debits $550 of collateral. If the protocol takes 20% of the bonus, it receives $10 and the liquidator receives $540. Remaining collateral is $650 against $500 of debt, giving a post-liquidation health factor of 0.975.
Interpret the scenarios and limits
Every parameter is an input; no current Aave or other protocol constant is assumed. Liquidation eligibility and close factors can depend on account state and protocol rules. The model holds prices and thresholds fixed, ignores interest accrued during execution, and values every asset in the same currency. A fully repaid debt has no finite health-factor denominator. Review total borrower seizure separately from the liquidator's proceeds, since the protocol's bonus share affects their incentives differently.