After maturity, a user might hold a long-dated Fixed Rate Token position against a matured Fixed Rate Token position. As the interest rate on the matured debt increases, the account's risk adjusted collateral value might become negative. A third party can't settle the account in the underlying money market since it does not accept Fixed Rate Tokens as collateral.
This liquidation method allows for the liquidation of Fixed Rate Tokens in exchange for Loan Tokens at an exchange rate determined by the Fixed Rate Token's present value at the maximum rate plus a buffer.
In practice a liquidator could flash liquidate an account's Fixed Rate Tokens by purchasing them at a low PV (lend at a high interest rate), deposit the Fixed Rate Tokens on a Tenor account and borrow Loan Tokens in a short dated maturity against the Fixed Rate Token position. If there is no Loan Token liquidity in any fixed rate pool it would be the case that this liquidation method requires a liquidator to purchase the Fixed Rate Tokens and hold them over some period of time.
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