# ARC: Polygon Market - wMATIC Risk Parameter Changes **URL:** \ **Category:** General\ **Created:** [November 4, 2021, 1:02pm UTC](https://governance.aave.com/t/arc-polygon-market-wmatic-risk-parameter-changes/6021 "2021-11-04T13:02:21Z")\ **Posts on this page:** 6\ **Page:** 1
**Author:** ![MatthewGraham](https://dub1.discourse-cdn.com/flex013/user_avatar/governance.aave.com/matthewgraham/32/1068_2.png) [@MatthewGraham](https://governance.aave.com/u/MatthewGraham)\ **Post date:** [November 4, 2021, 1:02pm UTC](https://governance.aave.com/t/arc-polygon-market-wmatic-risk-parameter-changes/6021/1 "2021-11-04T13:02:22Z")
aip: TBA title: Polygon Market - wMATIC Risk Parameter Changes status: Proposal author: @MatthewGraham @afromac created: 04/11/2021 # Simple Summary We propose adjusting two (2) MATIC risk parameters on the Aave Polygon Market: LTV and Liquidation Threshold. # Abstract This proposal updates two MATIC risk parameters on the Aave Polygon Market to align with the [Moderate risk level](https://snapshot.org/#/aave.eth/proposal/QmT9T4Rfnh1Z2HYmMPXvtFotMK2vSxiXK8dKStg2b6n4gi) chosen by the Aave community. Index Coop has compiled the following analysis for Gauntlet and the broader Aave community to review. # Motivation Updating the MATIC parameters seeks to maintain the overall risk tolerance of the protocol while making risk trade-offs between specific assets. # Specification The criteria for assessing market risk, as determined by the market size and changes in fluctuation in demand, is presented by the Aave community [here](https://docs.aave.com/risk/asset-risk/methodology#market-risk). In line with the criteria, analysis of the MATIC token on Polygon network is presented below: wMATIC Polygon Market Risk (Polygon Network Data) | Holders: | 168,102 | B+ to A- | B+ | | --- | --- | --- | --- | | Transactions | 100,240,631 | A | | | Mkt Cap | 586,568,252 | B+ to A- | | | Av. Vol. | $50,675,854 | C+ to B- | | | Norm. Vol | 0.06579 | C+ to B- | | The MATIC token risk score compiled by Index Coop is B+. This matches the risk score cited [here](https://docs.aave.com/risk/asset-risk/risks-per-asset). However, the volatility score of B- (C+ to B-) is justified by the 0.06579 score compared to 0.064 in the table presented in the [documentation](https://docs.aave.com/risk/asset-risk/methodology). Further to this, assets like BAL and BAT on Ethereum have similar vol characteristics to wMATIC on Polygon. The Norm. Vol parameter is the average of the t=30 days and t=90 days as shown in the below table. ## wMATIC Volatility Data (Polygon Network Data) | Time | S.D Vol | | --- | --- | | t=7 days | 0.08475 | | t=30 days | 0.06535 | | t= 90 days | 0.06622 | | t= 180 days | 0.09013 | | t= 365 days | NA | Based upon the volatility data share above, Index Coop suggests changing the Liquidation Threshold and Loan to Value parameters as shown below: | Parameter | Current Value | Recommended Value | | --- | --- | --- | | wMATIC Liquidation Threshold | 65% | 70% | | wMATIC Loan to Value | 50% | 65% | # Implementation We are actively seeking feedback on how to implement this proposal. At this point in time an AIP vote could signal community intent/desire to change the requirements with the changes to be made by the guardians of the Aave Polygon Market or via the AIP if a permissionless process is in place by that point in time. # Copyright Copyright and related rights waived via [CC0](https://creativecommons.org/publicdomain/zero/1.0/). ---
**Author:** ![JeremyKeating](https://dub1.discourse-cdn.com/flex013/user_avatar/governance.aave.com/jeremykeating/32/1023_2.png) [@JeremyKeating](https://governance.aave.com/u/JeremyKeating)\ **Post date:** [November 5, 2021, 8:17am UTC](https://governance.aave.com/t/arc-polygon-market-wmatic-risk-parameter-changes/6021/2 "2021-11-05T08:17:07Z")
Hello @MatthewGraham I get the rational and on the surface it seems reasonable and I expect it would be something that we should support I dont suppose you have a measure of the rolling volatility using 7, 30 and 90 day periods? It would be useful to understand what the trend might be as it does seem like it maybe trending slowly downwards. The proposed change in LTV seems justified from the information given albeit a bit of a jump from where we are now - do we normally make large movements like this or would an incremental move starting by perhaps 5%points to be followed with similar moves at monthly intervals be more normal Finally is it possible to get Gauntlet to run this through their models to get an idea of the impact particularly in LTV and liquidation propensity ---
**Author:** ![afromac](https://avatars.discourse-cdn.com/v4/letter/a/b3f665/32.png) [@afromac](https://governance.aave.com/u/afromac)\ **Post date:** [November 8, 2021, 2:29pm UTC](https://governance.aave.com/t/arc-polygon-market-wmatic-risk-parameter-changes/6021/3 "2021-11-08T14:29:44Z")
Hi Jeremy To your first point, here is the rolling volatility for those time periods. The chart is on a log scale to help with visibility. What I am seeing is a general trend towards lower volatility, with recent spikes gradually diminishing in magnitude. Thanks for your input and consideration here. ![Matic (Polygon Network) Rolling Volatility](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/e/e57a20b7aa46643bd824b5a38a738d99cf7e9de8.png) ---
**Author:** ![MatthewGraham](https://dub1.discourse-cdn.com/flex013/user_avatar/governance.aave.com/matthewgraham/32/1068_2.png) [@MatthewGraham](https://governance.aave.com/u/MatthewGraham)\ **Post date:** [November 10, 2021, 11:14am UTC](https://governance.aave.com/t/arc-polygon-market-wmatic-risk-parameter-changes/6021/4 "2021-11-10T11:14:03Z")
Hi All, I have created a Snapshot vote schedule to start 16th November and finishing on the 18th November. Please do participate in the vote, link below. [https://snapshot.org/#/aave.eth/proposal/0xcc559149703460cfdcbbed5859d327ce3ede235dd7d8b7d2454744e54fab312c](https://snapshot.org/#/aave.eth/proposal/0xcc559149703460cfdcbbed5859d327ce3ede235dd7d8b7d2454744e54fab312c) ---
**Author:** ![MatthewGraham](https://dub1.discourse-cdn.com/flex013/user_avatar/governance.aave.com/matthewgraham/32/1068_2.png) [@MatthewGraham](https://governance.aave.com/u/MatthewGraham)\ **Post date:** [November 13, 2021, 12:38pm UTC](https://governance.aave.com/t/arc-polygon-market-wmatic-risk-parameter-changes/6021/5 "2021-11-13T12:38:39Z")
Hi All, Further to the above, please note DeFi Pulse has proposed creating MATIC2x-FLI on the Aave Polygon Market. > **[IIP-XY: Launch MATIC2X-FLI (Polygon)](https://gov.indexcoop.com/t/iip-xy-launch-matic2x-fli-polygon/3186)** > > IIP: TBD Title: Launching MATIC 2x Flexible Leverage Index (MATIC2X-FLI) on Polygon Status: Proposed Author(s): Pulse Inc Created: 11-Oct-2021 Simple Summary Pulse Inc proposes that the Index Coop manages a new index that provides target 2x... For this product to be robust, the LTV parameters changes suggest in the ARC here are required. Otherwise, users are at greater risk of being liquidated during periods of volatility. ---
**Author:** ![MatthewGraham](https://dub1.discourse-cdn.com/flex013/user_avatar/governance.aave.com/matthewgraham/32/1068_2.png) [@MatthewGraham](https://governance.aave.com/u/MatthewGraham)\ **Post date:** [November 16, 2021, 9:16pm UTC](https://governance.aave.com/t/arc-polygon-market-wmatic-risk-parameter-changes/6021/6 "2021-11-16T21:16:44Z")
Hi All, Voting is now live on Snapshot. [https://snapshot.org/#/aave.eth/proposal/0xcc559149703460cfdcbbed5859d327ce3ede235dd7d8b7d2454744e54fab312c](https://snapshot.org/#/aave.eth/proposal/0xcc559149703460cfdcbbed5859d327ce3ede235dd7d8b7d2454744e54fab312c) Please do express your view by participating in the snapshot vote.