Overcollateralization
Backing a debt or position with collateral worth more than the obligation it supports.
In more detail
The extra collateral creates a buffer rather than making a loan risk-free. Its price can move, interest can add to the debt, and liquidation rules can act before collateral reaches the debt's value. The required buffer depends on the assets and protocol, so “overcollateralized” describes a relationship, not a promise of safety.
How you might use it
A position has $1,000 of collateral backing $400 of debt; it starts overcollateralized, but falling collateral prices can shrink that buffer.
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