# Account-level

Solera’s risk management system ensures account-level safety by establishing key parameters to monitor and control the risk of individual loans and collateral positions.

1. **Liquidation Threshold**\
   Solera assesses the risk of each loan using the **Liquidation Threshold**, calculated as the weighted average of all collateral types in an account. If the loan’s value exceeds this threshold relative to the collateral, the position is flagged for liquidation to safeguard the protocol’s solvency.
2. **Liquidation Penalty and Factor**\
   During liquidation, a **Liquidation Penalty** is applied to the collateral’s value as a fee for the process. The **Liquidation Factor** determines what portion of this fee is directed to the protocol’s treasury, striking a balance between user protection and protocol sustainability.
3. **Health Factor**\
   The **Health Factor** represents the overall risk level of an account, determined by the ratio of collateral to borrowed assets. It dynamically adjusts for market conditions and collateral performance. If the Health Factor drops below 1, the account is under-collateralized and may face liquidation to maintain the protocol’s stability.
4. **Reserve Factor**\
   The **Reserve Factor** allocates a portion of interest generated from lending to Solera’s ecosystem treasury. This factor is calibrated based on the risk associated with each asset, providing a buffer to support protocol longevity.
5. **Collateral Usage**\
   Certain assets, such as **USDT** and **sUSD**, are confined to **Isolation Mode** due to heightened centralization risks. Others, despite being decentralized, may not be accepted as collateral if they have limited liquidity or are still in testing phases. Solera provides up-to-date collateral criteria within its platform for users.

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**Market risks** directly influence these parameters, with **liquidity** and **volatility** playing critical roles in determining thresholds. More volatile assets are subject to stricter limits with lower **LTVs** and higher **liquidation thresholds**, while stable assets like **USDC** and **Liquid Staked PLUME** are given more flexible terms.

These parameters are constantly adjusted based on real-time market data, ensuring that Solera remains secure and responsive to changing market dynamics.