Gauntlet Risk Parameter Recommendation (7/27/2022)

Gauntlet makes the following recommendations to optimize risk and capital efficiency for Acala and Karura:

Recommendations:

We recommend decreasing the ACA liquidation ratio from 1.7 to 1.65.
We recommend decreasing the ACA minimum collateral ratio from 2.05 to 2.0.
We recommend decreasing the DOT minimum collateral ratio from 1.7 to 1.6.
We recommend increasing the KSM liquidation ratio from 1.5 to 1.55.
We recommend increasing the KSM minimum collateral ratio from 1.8 to 1.9.

Rationale:
The VaR is $1.7M, and our recommendations will leave it unchanged. KAR has a VaR of $3k. LCDOT has a VaR of $575k. LDOT has a VaR of $343k. LKSM has a VaR of $810k. ACA, DOT, and KSM each have a VaR of $0.

ACA is relatively safe from a market risk perspective, so can have its liquidation ratio gradually lowered to improve capital efficiency. KSM is relatively riskier, so we recommend increasing its liquidation ratio to reduce insolvency risk. DOT, KAR, LCDOT, LDOT, and LKSM’s liquidation ratios are currently at an optimal balance of risk and capital efficiency.

Potential Forced Liquidations:
Whenever we raise liquidation ratios, there’s a chance that some users may immediately become liquidatable as a result. However, as of our most recent data, the lowest KSM collateral ratio is 1.78, so no accounts would be immediately liquidated at today’s prices.

By approving this proposal, you agree that any services provided by Gauntlet shall be governed by the terms of service available at gauntlet.network/tos.

Gauntlet has given some suggestions to make Acala and Karura more efficient and safe. Here are the recommendations:

Decrease ACA liquidation ratio from 1.7 to 1.65.
Decrease ACA minimum collateral ratio from 2.05 to 2.0.
Decrease DOT minimum collateral ratio from 1.7 to 1.6.
Increase KSM liquidation ratio from 1.5 to 1.55.
Increase KSM minimum collateral ratio from 1.8 to 1.9.

These recommendations will not change the VaR of $1.7M for Acala and Karura. KAR has a VaR of $3k, LCDOT has a VaR of $575k, LDOT has a VaR of $343k, and LKSM has a VaR of $810k. ACA, DOT, and KSM each have a VaR of $0.

ACA is safe, so its liquidation ratio can be lowered to improve capital efficiency. KSM is riskier, so its liquidation ratio should be increased to reduce insolvency risk. DOT, KAR, LCDOT, LDOT, and LKSM’s liquidation ratios are already balanced.

There is a chance that some users may become liquidatable when liquidation ratios are raised. However, as of the latest data, no accounts would be immediately liquidated at today’s prices.

By approving this proposal, you agree to Gauntlet’s terms of service.

#10·Gauntlet Risk Parameter Recommendation (7/27/2022)