Gauntlet Risk Parameter Recommendations: Lowering KAR Collateral Ratio

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

Summary:

  • Reduce the minimum collateralization ratio of KAR from 1.9 to 1.8.

Rationale:

Since last week, KSM volatility has increased from 86% to 98% and the $ADV decreased from $30.7M to $28.6M. The kUSD minted decreased from $9.0M to $8.9M. The Value at Risk increased from $0.30M to $2.2M. Breaking down the VaR further, all of it comes from the possibility of insolvent liquidations of KSM, not KAR. Our platform’s analysis shows that we can safely take a more aggressive stance with respect to KAR to raise capital efficiency while keeping risks within acceptable limits.

Dashboard:

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

This is the onchain motion from Karura Financial Council to apply this suggestion: Lowering KAR Collateral Ratio

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