Gauntlet Risk Parameter Recommendation (7/27/2022)

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

Recommendations:

We recommend decreasing the ACA liquidation ratio from 1.7 to 1.65.
We recommend decreasing the ACA minimum collateral ratio from 2.05 to 2.0.
We recommend decreasing the DOT minimum collateral ratio from 1.7 to 1.6.
We recommend increasing the KSM liquidation ratio from 1.5 to 1.55.
We recommend increasing the KSM minimum collateral ratio from 1.8 to 1.9.

Rationale:
The VaR is $1.7M, and our recommendations will leave it unchanged. KAR has a VaR of $3k. LCDOT has a VaR of $575k. LDOT has a VaR of $343k. LKSM has a VaR of $810k. ACA, DOT, and KSM each 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 is relatively riskier, so we recommend increasing its liquidation ratio to reduce insolvency risk. DOT, KAR, LCDOT, LDOT, and LKSM’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 most recent data, the lowest KSM collateral ratio is 1.78, so no accounts would be immediately liquidated at today’s prices.

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.

Gauntlet has given some recommendations to Acala and Karura to optimize their risk and capital efficiency. Here are the recommendations:

Decrease the ACA liquidation ratio from 1.7 to 1.65.
Decrease the ACA minimum collateral ratio from 2.05 to 2.0.
Decrease the DOT minimum collateral ratio from 1.7 to 1.6.
Increase the KSM liquidation ratio from 1.5 to 1.55.
Increase the KSM minimum collateral ratio from 1.8 to 1.9.

These recommendations are based on the VaR (Value at Risk) of each asset. ACA is relatively safe, so its liquidation ratio can be gradually lowered to improve capital efficiency. KSM is riskier, so its liquidation ratio should be increased to reduce insolvency risk. The other assets have an optimal balance of risk and capital efficiency.

There is a chance that some users may become liquidatable when liquidation ratios are raised, but as of the most recent data, no accounts would be immediately liquidated at today's prices.

By approving this proposal, the terms of service available at gauntlet.network/tos will govern any services provided by Gauntlet.

#34·Gauntlet Risk Parameter Recommendation (7/27/2022)