Gauntlet Risk Parameter Recommendation (4/28/2022)

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

Karura Recommendations:

  • We recommend lowering KSM’s minimum collateral ratio from 1.6 to 1.5.

Rationale:

Since our last recommendations, VaR has decreased from $3.0M to $2.8M. KAR’s VaR has decreased from $1.4M to $1.1M, while LKSM’s VaR has remained flat at $1.6M. KSM’s VaR rose slightly from $5k to $6k. With KSM’s VaR remaining so close to zero, our simulation engine shows that the capital efficiency gain by allowing users to take on KSM debt at a lower ratio more than offsets the slight increase in market risk.

Dashboard:

The community should use Gauntlet’s Risk Dashboard to understand better the updated parameter suggestions and general market risk in Karura.

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It might be wise to delay this until after the May 15th unlocks. There is the potential for a temporary dip in price when ~1.1M KSM are released back into circulation.

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Thanks for the suggestion. This is the onchain proposal: Gauntlet Risk Parameter Recommendation (4/28/2022)

@bacchist we still have 2 weeks until the unlock and we reassess the risk parameters every week so it should be safe to apply this change.

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