Defaults

Default occurs when a borrower (i) fails to maintain sufficient margin or (ii) fails to repurchase on time (or within the repurchase window).

Default occurs when a borrower (1) fails to maintain sufficient margin or (2) fails to repurchase its collateral tokens within the repayment window.

Margin deficit

A margin deficit occurs when the value of a borrower's collateral is no longer sufficient to meet the maintenance margin ratio. The protocol tracks this by monitoring a borrower's transaction exposure, which is calculated as follows:

$\text{transactionExposure} = \text{maintenanceMarginRatio}*\text{repurchasePrice}-\text{collateralMarketValue}$

where the collateral market value is measured in real-time using Chainlink oracle price feeds. Where a borrower's Transaction Exposure is negative, their collateral is eligible for liquidation.

Failure to repurchase

The repurchase date marks the maturity date of a Term Repo. Borrowers are required to repurchase their collateral tokens on the repurchase date and they must do so within the repurchase window, which typically lasts 12 to 24 hours from the repurchase date. Failure to do so means that the borrower is in default and their collateral is eligible for liquidation.