# Collateral Asset

A Collateral Asset is a digital asset that an Asset Manager deposits into a Margin Account to secure a loan in the Arkis ecosystem. It serves as a financial guarantee that ensures lenders and liquidity providers are protected in case of a borrower's default or excessive risk exposure.

### How it Works

1. **Deposit:** The Asset Manager deposits an approved (whitelisted) token—like ETH, LSTs, Pendle PTs, or LP tokens—into a Margin Account.
2. **Risk Assessment:** The value of the asset is monitored in real time by the [Arkis Margin Engine](https://docs.arkis.xyz/home/concepts/margin-engine), which calculates the [Risk Factor](https://docs.arkis.xyz/home/concepts/risk-factor) and [Stress-Tested Value](https://docs.arkis.xyz/home/concepts/stress-tested-value) ratio.
3. **Leverage Enablement:** Based on the collateral's quality and risk profile, the Asset Manager can borrow funds or open leveraged positions within approved limits.
4. **Usage:** The Asset Manager can trade, yield farm, or hedge with the borrowed assets—only within whitelisted protocols—while the collateral remains locked in the Margin Account.
5. **Liquidation Safety Net:** If the Risk Factor crosses a critical threshold, Arkis will liquidate part or all of the collateral automatically to repay lenders and protect the platform from losses.

### **Key Properties of a Collateral Asset:**

* Must be part of the [Whitelisted Assets](https://docs.arkis.xyz/home/concepts/whitelisted-assets)
* Subject to LTV constraints (e.g., 50% for volatile tokens, up to 80–90% for stable collateral)
* Can be yield-bearing, such as Pendle PT tokens or Curve LPs
* Must have sufficient onchain liquidity to allow liquidation with minimal slippage

#### **Example:**

An Asset Manager deposits $1,000 worth of EtherFi (LST) into a Margin Account. Based on the token’s risk profile, Arkis allows a max LTV of 60%. The Asset Manager can now borrow up to $600 worth of USDC and use it to open positions or farm on whitelisted DeFi protocols—all while EtherFi acts as collateral.