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Moonwell Risk Methodology
Interest Rate Model
Proposal Diff Reports
Breakdown of Close Factor parameter utility and methodology
Close factor corresponds to the maximum amount of an outstanding borrow that can be closed in a single liquidation event.
The parameter is set globally for the protocol, just like the liquidation incentive setting.
From a risk management perspective, the close factor needs to be high enough to incentivize small liquidations to be carried, but not too high to avoid penalizing violators too heavily.