Hello. I want to understand exactly how to calculate the liquidation treshold of a loan in AAVE. I went to the FAQ’s Risk Parameters section and it says:
“The liquidation threshold is the percentage at which a position is defined as undercollateralised. For example, a Liquidation threshold of 80% means that if the value rises above 80% of the collateral, the position is undercollateralised and could be liquidated.”
Let’s suppose that ETH price is $3k, LTV is 75% and the Liquidation Treshold is 80%, so I borrow 2250 USDC putting 1 ETH as collateral. According to the definition above, I would get liquidated when 2250 USDC (the loan) is bigger in value than 0.8 ETH (80% of my collateral). This means that if the price of ETH goes below $2812 (2250/0.8) I get liquidated.
Is this correct? Am I missing something?