Risk Parameter Updates for Aave V2 (2022-11-17)

Simple Summary

A proposal to adjust two (2) total risk parameters, including Liquidation Threshold and Loan To Value, across one (1) Aave V2 asset.

Motivation

This set of recommendations follows AIP 117 to further de-risk the REN market.

Supporting Data on Aave V2

Top 30 borrowers’ aggregate positions & borrow usages

Top 30 borrowers’ entire supply

Top 30 borrowers’ entire borrows

Price changes of key assets since 2022-11-03

Time series of Value at Risk (VaR) since 2022-11-03

Top 10 REN suppliers and percentage of total REN supplies:

Top 10 REN suppliers and borrow usages:

Entire supply positions for top 10 REN suppliers:

Entire borrow positions for top 10 REN suppliers:

Aave V2 Parameter Changes Specification

Gauntlet's simulation engine will continue to adjust risk parameters to protect against outsized market risk while optimizing for capital efficiency.

These parameter recommendations reflect the unique situation of REN in the current market conditions.

Implementation

The proposal sets the LTV and liquidation threshold ratios by calling configureReserveAsCollateral on the LendingPoolConfigurator using the address and parameters specific to each token.

The full list of parameter updates can be found in the forum.

Copyright

Copyright and related rights waived via CC0.

Gauntlet launched an insolvency refund for Aave that contains a portion of our payment stream that can be clawed back in the event of insolvencies due to market risk. Since our last recommendation there have been no new insolvencies in Aave. Gauntlet’s Insolvency Refund vault is still live and can be seen here 0x7667095Caa12b79fCa489ff6E2198Ca01fDAe057

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.