Gauntlet makes the following recommendations to optimize risk and capital efficiency for Acala and Karura:
Since our last recommendations, VaR has increased from $694k to $1.02M. All of the VaR comes from two assets: LKSM and LCDOT. LKSM’s VaR has decreased from $565k to $541k. LCDOT’s VaR has increased from $98k to $479k. The other assets (KSM, KAR, DOT, LDOT, ACA) all currently have VaR of $0.
KAR, DOT, LDOT, and ACA are all relatively safe from a market risk perspective, so can have their liquidation ratios gradually lowered to improve capital efficiency. LKSM and LCDOT remain risky, so we recommend continuing to increase their liquidation thresholds to further reduce insolvency risk. KSM optimally balances insolvency risk against capital efficiency at its current parameters.
The community should use Gauntlet’s Risk Dashboard to understand better the updated parameter suggestions and general market risk in Acala.
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