Gauntlet makes the following recommendations to optimize risk and capital efficiency for Acala and Karura:
Recommendations:
Rationale:
The VaR is $3.5M, and our recommendations will reduce it to $3.4M. ACA has a VaR of $1.1M. KAR has a VaR of $888k. LCDOT has a VaR of $472k. LDOT has a VaR of $334k. LKSM has a VaR of $674k. DOT and KSM both have a VaR of $0.
ACA is relatively safe from a market risk perspective, so can have its liquidation ratio gradually lowered to improve capital efficiency. KSM, LDOT, and LKSM are relatively riskier, so we recommend increasing their liquidation ratios to reduce insolvency risk. DOT, KAR, and LCDOT’s liquidation ratios are currently at an optimal balance of risk and capital efficiency.
Potential Forced Liquidations:
Whenever we raise liquidation ratios, there’s a chance that some users may immediately become liquidatable as a result. However, as of our latest data, there are no borrowers with liquidation ratios below those we have recommended.
By approving this proposal, you agree that any services provided by Gauntlet shall be governed by the terms of service available at gauntlet.network/tos.
For a second-grade student:
Gauntlet is giving advice to Acala and Karura to make them safer and more efficient. They suggest changing some numbers to make things better. They want to make sure that the companies have enough money to pay for things if something goes wrong. They also want to make sure that the companies are not taking too much risk. They checked to make sure that no one will lose their money if they make these changes.