LLTV (Liquidation Loan-to-Value)

Liquidation Loan-to-Value (LLTV) is the loan-to-value ratio at which a borrower's position becomes liquidatable. When outstanding debt divided by the value of posted collateral crosses this threshold, anyone on-chain can call the liquidation function and seize collateral to repay the loan at a discount.

LLTV is the ceiling. Borrowers operate well below it, and the gap between operating LTV and LLTV is the borrower's headroom against adverse price moves.

The term varies by protocol. Morpho Blue calls it LLTV and locks the value at market creation per collateral pair. Aave calls it the liquidation threshold and lets DAO governance adjust it.

Compound v3 uses the term liquidation factor. What's invariant across these designs is the role: a ceiling that triggers liquidation. What varies is whether the number is locked at deployment or governance-mutable, and whether it's set per market or per asset.

Stable collateral carries higher values because price moves don't blow through the liquidation window; volatile collateral carries lower ones, because the protocol needs room to liquidate the position before bad debt accrues to the lenders.

LLTV's sometimes confused with operating LTV (the live ratio of debt to collateral) and origination LTV (the ratio at loan opening). All three matter, but only LLTV triggers liquidation.

At Rekord, LLTV is set per Morpho Blue market and locked at creation, sized conservatively by collateral volatility. For current parameters, contact the capital markets desk.