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description: Breakdown of Close Factor parameter utility and methodology
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# 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.
