> For the complete documentation index, see [llms.txt](https://docs.markovlabs.xyz/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.markovlabs.xyz/curation-methodology/risk-framework/collateral-standards/market-factors/parameterization/lltv/lif.md).

# LIF

### Liquidation Incentive Factor

The Liquidation Incentive Factor (LIF), as implemented in both Morpho and Fira, represents the economic reward available to liquidators when closing under-collateralized positions. We use this as a core input in determining how much capital can safely be allocated to a given market. Higher LIFs generally support larger caps, as they provide stronger incentives for third-party liquidators to act quickly and reliably.

$$
LIF = max\left\[\frac{1}{0.7 + 0.3\times LLTV},\space 1.15\right]
$$

See [Morpho Documentation](https://docs.morpho.org/learn/concepts/liquidation#liquidation-incentive-factor-lif) for further explanation.