ARC: LTV and Liquidation Threshold Levels 2021-08-26

Conservative metrics: the models target a 15% decrease on each side of the capital efficiency (opportunity cost of capital) as well as risk metrics (some conflation of liquidations, insolvencies, and market impact) on each asset.

Moderate metrics: target a similar risk profile to the current risk parameters with reweightings to achieve slightly better capital efficiency.

Aggressive recommendations target a 10% increase for capital efficiency (opportunity cost of capital) with considerations for the same risk metrics (liquidations, insolvencies, and market impact) on each asset.

Our models suggest there is headroom to make further updates across most Aave v2 assets. These initial changes look more at specific asset values that are suboptimal and baseline the risk appetite of the community. The Risk Dashboard currently in production will be able to provide much of that granularity in the near future.

2 Likes