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Quantitative Finance · Glossary

What is Liquidation price, bankruptcy price?

Also known as: liquidation price · bankruptcy price

Definition 18.2 Markets III: Commodities, Energy and Crypto · Chapter 18 — Margin, Liquidation and Loss Allocation

The liquidation price of a position is the mark price at which its margin plus unrealised P&L falls to its maintenance margin, so that the venue takes it over. Its bankruptcy price is the price at which margin plus unrealised P&L is exactly zero.

Liquidation prices of isolated positions as a function of leverage, with a maintenance margin rate of 0.5% (). A long inverse position with coin margin is liquidated sooner than a linear one: at 2 times leverage, after a 33% fall instead of 50%. Data: the chapter’s tutorial.
Figure 18.1. Liquidation prices of isolated positions as a function of leverage, with a maintenance margin rate of 0.5% (Proposition 18.3). A long inverse position with coin margin is liquidated sooner than a linear one: at 2 times leverage, after a 33% fall instead of 50%. Data: the chapter’s tutorial.
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