> For the complete documentation index, see [llms.txt](https://docs.warden.finance/docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.warden.finance/docs/moonwell-risk-methodology/governance-parameters/close-factor.md).

# Close Factor

## Utility <a href="#id-3lq526l3ah0j" id="id-3lq526l3ah0j"></a>

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.

## **Methodology**

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.