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#16
Risk Parameter Update for LKSM and KSM
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Gauntlet makes the following recommendations to optimize for risk and capital efficiency for Karura:

Karura Recommendations:

  • Raise the minimum collateral ratio for LKSM from 1.9 to 2.0.
  • Lower the minimum collateral ratio for KSM from 1.9 to 1.8.
  • Lower the liquidation ratio for KSM from 1.5 to 1.4.

Rationale:

Since last week, VaR (Value at Risk) has increased from $1.77M to $2.41M, with 71.2% coming from LKSM, 28.8% from KAR, and 0% from KSM. kUSD issuance is up slightly from 5.6M to 5.7M. KSM annualized volatility is up slightly from 119% to 122%. The 7-day $ADV is down from $31.6M last week to $17.8M today.

Our economic risk simulations show a high potential for insolvency in LKSM if volatility were to double or triple from its current levels. Raising the minimum collateral ratio will prevent users from taking on additional risk. KSM has the opposite issue: there are zero insolvencies in any of our sims at any level of volatility. This is a sign that it is safe to lower collateral and liquidation ratios to improve capital efficiency.

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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Metadata
Proposer
Index
16
Threshold
2
Hash
0x80176e581b06640da6e36ee0fd5e52512a6d8e5795ac67b019beedce0e4ea0ca
Call
Table
Json
callIndex0x0302
sectionutility
methodbatchAll
args
calls
0
callIndex0x6803
sectioncdpEngine
methodsetCollateralParams
args
currencyId
tokenLKSM
interestRatePerSecNoChange
liquidationRatioNoChange
liquidationPenaltyNoChange
requiredCollateralRatio
newValue2000000000000000000
maximumTotalDebitValueNaN
1
callIndex0x6803
sectioncdpEngine
methodsetCollateralParams
args
currencyId
tokenKSM
interestRatePerSecNoChange
liquidationRatio
newValue1400000000000000000
liquidationPenaltyNoChange
requiredCollateralRatio
newValue1800000000000000000
maximumTotalDebitValueNaN
TimelineLatest activity undefined
2022-02-22 01:18:48
Proposed
batchAll
2/2
Aye(2)
Nay(0)
2022-02-22 01:25:30
Vote
2022-02-22 01:31:54
Vote
2022-02-22 02:27:54
Closed
2022-02-22 02:27:54
Approved
2022-02-22 02:27:54
Executed
Result
Succeed
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