LTV Buffer

The LTV buffer is the difference between a borrower's current loan-to-value ratio and the maximum LTV allowed by the protocol. A larger buffer provides more room for the borrower to withstand price fluctuations without hitting the liquidation threshold.

Borrowers actively manage this buffer to avoid the costs and stress of potential liquidations. When the market is volatile, the buffer can shrink rapidly, forcing borrowers to act quickly.

The LTV buffer is a personal risk management metric that complements the protocol's system-wide risk parameters. It is an essential concept for any user engaging in leveraged positions in decentralized finance.