> For the complete documentation index, see [llms.txt](https://learn.trovemarkets.com/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://learn.trovemarkets.com/risk/margin-calculations/isolated-margin-model.md).

# Isolated margin model

<figure><img src="/files/2Uy6pWvfJio1b5QXx9aa" alt=""><figcaption></figcaption></figure>

#### Key ratios

* IMR (Initial Margin Ratio):&#x20;
  * minimum collateral to open a position. With max 5× leverage, IMR = 20%.
* MMR (Maintenance Margin Ratio):&#x20;
  * collateral threshold below which liquidation begins (shown in the UI and may vary by market/volatility).

| Ratio   | What it means                                    | Trove default               |
| ------- | ------------------------------------------------ | --------------------------- |
| **IMR** | Minimum collateral to **open** a position        | **20%** (at 5×)             |
| **MMR** | Collateral threshold to **keep** a position open | **10%** of current notional |

***

### Account equity & requirements

```
Equity = Balance + Unrealized PnL − Fees ± Funding
IM Requirement = Σ (IMR_asset × Notional_asset)
MM Requirement = Σ (MMR_asset × Notional_asset)
```

* **Cross‑margin:** equity and requirements are computed at **account level** across all positions.
* **Health:** `Health = Equity − MM Requirement`. Liquidation starts when Health ≤ 0.

***

### Position health (isolated)

| Term                        | Plain meaning                                                |
| --------------------------- | ------------------------------------------------------------ |
| **Isolated margin**         | Collateral you posted to this **one** position               |
| **Unrealized PnL**          | Running PnL from entry to current mark                       |
| **Maintenance requirement** | 10% of **current** position notional                         |
| **Liquidation condition**   | If margin buffer drops **below** the maintenance requirement |

<div align="left"><figure><img src="/files/9LUuuT2FfV9jA4fQ77hJ" alt=""><figcaption></figcaption></figure></div>

**What improves health**

* Adding margin
* Reducing position size
* Price moving in your favor

***

### Safeguards & limits

#### Open Interest caps (per asset)

| Cap type            | Setting                      | Notes                                                |
| ------------------- | ---------------------------- | ---------------------------------------------------- |
| **Notional OI cap** | **$1,000,000** (initial)     | New opens rejected at the cap                        |
| **Size OI cap**     | **1,000,000,000** base units | With `szDecimals=2` → **10,000,000** units effective |

#### Price-safety rails (engine-level)

| Rail                  | Setting                                                         | Purpose                             |
| --------------------- | --------------------------------------------------------------- | ----------------------------------- |
| **Daily price limit** | **±10×** from start-of-day                                      | Blocks absurd prints                |
| **Per-update bound**  | **±1%** mark change per \~**3s** update                         | Smooths paths; \~20%/min linear     |
| **OI-adjusted bound** | Mark cannot jump to levels that would exceed **10×** the OI cap | Prevents cascade risk               |
| **Emergency halt**    | `haltTrading` available                                         | Pause a specific market in extremes |


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