Simple Summary

A proposal to adjust three (3) risk parameters (collateral factor & borrow cap) across three (3) Compound V2 assets.

The community has aligned on a risk off framework.

Background

Gauntlet's simulation engine has ingested the latest market and liquidity data. These recommendations are Gauntlet's regular parameter recommendations as part of Dynamic Risk Parameters.

Full proposal and forum discussion

Motivation and Specification

This set of parameter updates seeks to maintain the overall risk tolerance of the protocol while making risk trade-offs between specific assets.

Our parameter recommendations are driven by an optimization function that balances 3 core metrics: insolvencies, liquidations, and borrow usage. Our parameter recommendations seek to optimize for this objective function. For more details, please see Gauntlet's Parameter Recommendation Methodology and Gauntlet's Model Methodology.

Dashboard

Gauntlet has launched the Compound Risk Dashboard. The community should use the Dashboard to understand better the updated parameter suggestions and general market risk in Compound.

Value at Risk represents the 95th percentile insolvency value that occurs from simulations we run over a range of volatilities to approximate a tail event.

Liquidations at Risk represents the 95th percentile liquidation volume that occurs from simulations we run over a range of volatilities to approximate a tail event.

These parameter changes decrease borrow usage by 5 basis points, decrease VaR by 15.3%, and decrease LaR by $0.96M.

Specification

The proposal uses the Configurator contract to update the asset parameters listed above using the _setCollateralFactor and _setMarketBorrowCaps methods.

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.