> For the complete documentation index, see [llms.txt](https://steakhouse.financial/docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://steakhouse.financial/docs/risk-management/collateral/layers-pillars-and-criteria/market-rating-layer-3/lltv.md).

# LLTV

LLTV is one of four criteria in Steakhouse Financial's Market Rating layer. The LLTV criterion increases the Price Fluctuation score by one notch for each step down in LLTV, starting from 94.5%.

Money markets use a Liquidation Loan-to-Value (LLTV) ratio, which defines the maximum amount that can be borrowed against a given collateral asset. If the collateral’s value falls below the threshold implied by the LLTV, the position becomes eligible for liquidation.

In most systems, any user can act as a liquidator, repaying the debt and seizing collateral in exchange for a bonus (called the liquidation incentive on Morpho). This open-participation model, combined with an automated liquidation mechanism, helps ensure timely liquidations and limits losses and the creation of bad debt. Bad debt arises when the outstanding loan exceeds the value of the posted collateral and the borrower has no incentive to repay.

Markets with lower LLTVs intrinsically reduce the risk of bad debt and typically offer higher liquidation bonuses to liquidators, incentivizing efficient action.

The LLTV criterion increases the [Price Fluctuation](/docs/risk-management/collateral/layers-pillars-and-criteria/market-rating-layer-3/price-fluctuation.md) score by one notch for each step down in LLTV, starting from 94.5%.


---

# Agent Instructions
This documentation is published with GitBook. GitBook is the documentation platform designed so that both humans and AI agents can read, navigate, and reason over technical content effectively. Learn more at gitbook.com.

## Querying This Documentation
If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question.

Perform an HTTP GET request on the current page URL with the `ask` query parameter, and the optional `goal` query parameter:

```
GET https://steakhouse.financial/docs/risk-management/collateral/layers-pillars-and-criteria/market-rating-layer-3/lltv.md?ask=<question>&goal=<endgoal>
```

`ask` is the immediate question: it should be specific, self-contained, and written in natural language.
`goal` is optional and describes the broader end goal you are ultimately trying to accomplish on behalf of the user. GitBook uses it to tailor the answer towards what is most useful for that goal.

The response will contain a direct answer to the question and relevant excerpts and sources from the documentation.

Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.