Gauntlet Risk Parameter Recommendations: Lowering LKSM Collateral Ratio

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

Summary:

  • Lower the LKSM minimum collateral ratio from 1.9 to 1.8

Rationale:

Gauntlet’s simulations show that LKSM is a very safe asset at current parameters. Even in our highest volatility sims, less than 5% of sims involve any insolvent LKSM debt. Our analysis shows that it is safe to adopt more aggressive parameters for LKSM to improve capital efficiency. Since last Monday, KSM volatility has increased from 138% to 144% and the $ADV decreased from $36M to $27M. The kUSD minted increased from about $10.1M to $10.3M. The Value at Risk rose from $675k to $1.03M.

Dashboard:

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

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The suggested change is applied by the Karura Financial Council: Subscan | Substrate based blockchain explorer

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