# Health Score

The Health Score is a key concept of Clone's Comet Liquidity System. This scoring mechanism ensures that comets remain safely collateralized under varying market conditions. It accounts for the value of the collaterals provided, sizes of the comet positions, and the current impermanent losses incurred. It's a metric that ranges from 0 to 100, designed to offer a snapshot of the overall health of your position. If the health score of a comet is equal to 0, the position is subject to liquidation.

### Calculation of the Health Score <a href="#calculation-of-the-health-score" id="calculation-of-the-health-score"></a>

The Health Score (H) is calculated using the formula:​

$$
H = 100 - \frac{I + P}{V\_{\text{eff}}}
$$

where 'I' represents the impermanent loss term, 'P' represents the position impact term, and 'Veff' represents the effective collateral value.

### Impermanent Loss Term (I) <a href="#impermanent-loss-term-i" id="impermanent-loss-term-i"></a>

The impermanent loss term 'I' quantifies the impact of impermanent losses from each liquidity position within the comet. As the comet position incurs losses, the overall debts increase, thereby reducing the Health Score. 'I' is calculated as the summation of the impermanent loss of each comet position (λi) multiplied by the impermanent loss coefficient (CI).​

$$
I = C\_{I} \~ \sum\_i \lambda\_i
$$

### Position Impact Term (P) <a href="#position-impact-term-p" id="position-impact-term-p"></a>

The position impact term 'P' encapsulates the effect of the amount of liquidity contribute by each comet position. Larger positions relative to the collateral tend to be riskier and thus negatively impact the score. 'P' is calculated as the summation of each comet position's US dollar size (Si) and the corresponding position impact coefficient (Cp,i).​

$$
P = \sum\_i C\_{p,i} \~ S\_i
$$

### Effective Collateral (Veff) <a href="#effective-collateral-veff" id="effective-collateral-veff"></a>

The effective collateral 'Veff' factors in the price volatility and execution slippage of your collateral, which in this case is USDC. Each asset carries its own volatility and liquidity characteristics, represented by a collateral asset coefficient (C). Since USDC will be our collateral on mainnet, it will have a 'C' value of 1, while riskier assets have a 'C' value of less than 1. 'Veff' is calculated as the collateral amount (x) weighted by its 'C' and multiplied by its price (p).​

$$
V\_{eff} = Cx p
$$

### Determination of Coefficients <a href="#determination-of-coefficients" id="determination-of-coefficients"></a>

The coefficients 'CI', 'Cp,i', and 'C' are decided upon by the Clone DAO. The team uses extensive protocol simulations, backtesting, as well as evaluation of current market conditions to propose parameters to use.

### Health Score and Liquidation <a href="#health-score-and-liquidation" id="health-score-and-liquidation"></a>

The Health Score acts as a barometer of the risk of liquidation. If the Health Score reaches 0, another entity can begin liquidating the comet in order to increase its health. Therefore, a crucial part of managing your comet is to ensure that the Health Score remains above zero.

Through the lens of the Health Score, you're empowered to strategically manage your positions, balance your risk, and make the most out of the Comet Liquidity System.


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