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

Karura Recommendations:

• We recommend increasing LKSM’s liquidation ratio from 1.6 to 1.65.

Rationale:

Since last week, VaR has decreased from $2.3M to $827k. KAR’s VaR has decreased from $1.2M to $0, while LKSM’s VaR has decreased from $1.1M to $827k. KSM’s VaR remained at $0. All of the remaining insolvency risk is concentrated in LKSM, and our simulations indicate that increasing the LKSM liquidation ratio can further mitigate that risk with an acceptable tradeoff in capital efficiency.

Dashboard:

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