Accounts whose total value falls below the maintenance margin requirement (described above) may have their positions automatically closed by the liquidation engine. Positions are closed at the close price described below. Profits or losses from liquidations are taken on by the insurance fund.
Close Price for Liquidations
The close price for a position being liquidated is calculated as follows, depending whether it is a short or long position:
Close Price (Short) = P × (1 + (M × V / W))
Close Price (Long) = P × (1 − (M × V / W))
Where:
P is the oracle price for the market
M is the maintenance margin fraction for the market
V is the total account value, as defined above
W is the total maintentance margin requirement, as defined above
This formula is chosen such that the ratio V / W is unchanged as individual positions are liquidated.
