Understand your assumptions
DeFi risk & net yield calculator
A health factor estimates the margin between collateral and debt. Net yield subtracts borrowing and costs from modeled earnings. Change the assumptions below to see how each behaves. These are simplified scenarios, not live position data or financial advice.
Collateral stress test
One collateral asset; fixed debt value and liquidation threshold.
Current health factor: 1.60
After a 20% collateral decline: 1.28
Modeled collateral value at health factor 1: $6,250.00
A modeled health factor at or below 1 signals the liquidation boundary in this simplified model. Above 1 does not mean safe. Oracle moves, interest, multi-asset weighting and protocol-specific rules are excluded.
Net yield after costs
Constant supply APY, simple borrowing APR, 365-day year.
Gross modeled earnings: $121.03
Borrowing cost: $0.00
Net modeled gain: $91.03
Break-even supply APY: 1.22%
Earning capital is the total supplied amount; debt is not added automatically. The result excludes principal repayment, tax, token-price changes, liquidation and unentered costs.
How much APY covers borrowing and fees?
The break-even supply APY is the annual yield needed for modeled earnings to equal borrowing interest plus entered costs over your holding period. A higher quoted APY can still produce a loss if rates fall, asset prices move or costs rise. Break-even does not mean risk-free.
Formulas and worked examples
Health factor = collateral value × (liquidation threshold ÷ 100) ÷ debt. With $10,000 collateral, $5,000 debt and an 80% threshold, the result is 1.60. A 20% fall in collateral gives 1.28. The threshold collateral value is $6,250.
Supply earnings = capital × ((1 + APY ÷ 100)^(days ÷ 365) − 1). Borrow interest = debt × (APR ÷ 100) × days ÷ 365. Net gain = earnings − borrow interest − entered costs. Break-even APY (%) = ((1 + (borrow interest + costs) ÷ capital)^(365 ÷ days) − 1) × 100.
At 5% APY over 90 days, $10,000 produces $121.03 in the constant-rate model. Subtracting $30 of costs leaves $91.03. The break-even supply APY is 1.22%. These examples are hypothetical.
Read APR versus APY and net yield, review the DeFi risk checklist, and verify real lending mechanics in Aave’s liquidation documentation. No wallet connection or personal financial information is required.