Risk Engine & Liquidation Dynamics
The real-time on-chain risk evaluation model: margin requirements, mark price oracles, backstop liquidity, and auto-deleveraging (ADL).
1. Cross Margin vs. Isolated Margin
HyperCore evaluates account solvency deterministically (see Risk Documentation) at every block interval before matching orders. Traders can select between two risk modes:
Cross Margin
All open positions share the unified USDC collateral balance. Profits from winning positions automatically offset unrealized losses on others, reducing premature liquidation risks during volatile market swings.
Isolated Margin
Collateral is assigned strictly to an individual position. The maximum potential loss is strictly capped to the allocated margin for that trade, isolating the rest of the account balance.
2. Maintenance Margin & Liquidation Thresholds
A position enters liquidation when an account's equity falls below the Maintenance Margin Requirement (MMR). Maintenance margin ratios scale with position size tiers to prevent market impact during large liquidations:
| Position Tier (Notional) | Initial Margin (IMR) | Maintenance Margin (MMR) | Max Leverage |
|---|---|---|---|
| $0 – $100,000 | 2.0% | 1.0% | 50x |
| $100,000 – $1,000,000 | 4.0% | 2.0% | 25x |
| $1,000,000 – $5,000,000 | 10.0% | 5.0% | 10x |
| $5,000,000+ | 20.0% | 10.0% | 5x |
3. Liquidation Waterfall: HLP Backstop & ADL
Hyperliquid uses a multi-tier liquidation waterfall designed to prevent bad debt and protect system solvency:
- Partial Liquidation: The engine cancels all unexecuted open orders to free up collateral. If still insolvent, it liquidates position increments into the order book.
- HLP Backstop Absorption: If order book depth is insufficient, the HLP vault absorbs the liquidated position at the bankruptcy price, preventing price cascading.
- Auto-Deleveraging (ADL): If the HLP vault cannot absorb the position due to extreme market dislocation, profitable counter-traders ranked by leverage and profit ratio are automatically deleveraged to close the deficit with zero socialized debt.
🔗 Official External References & Primary Sources
To verify the technical architecture, mathematical parameters, and protocol specifications described in this chapter, consult the official documentation:
- Hyperliquid Risk Engine Documentation ↗ Official maintenance margin formulas and liquidation waterfall architecture.
- Funding Rate Equilibrium Guide ↗ Detailed breakdown of hourly funding payment mechanisms and mark price oracles.
- Hyperliquid Liquidation & Solvency Telemetry ↗ Real-time insurance fund metrics, HLP vault balance, and open interest risk.