Should four (4) total risk parameters across three (3) Aave V2 assets be adjusted?

Forum Discussion

Simple Summary

A proposal to adjust four (4) total risk parameters across three (3) Aave V2 assets including LTV, Liquidation Threshold, and Liquidation Bonus.

Abstract

This proposal is a batch update of three risk parameters to align with the the Moderate risk level chosen by the Aave community. These paramater updates are a continuation of Gauntlet's regular parameter recommendations, the latest being AIP-42: Risk Parameter Updates 2021-10-14.

Motivation

This set of parameter updates seeks to maintain the overall risk tolerance of the protocol while making risk trade-offs between specific assets. For more detail on Gauntlet's first two months of recommendations and their impact, please see our Monthly Risk Report.

Specification

No significant changes in volatility or liquidity were observed in most assets. However, we would note that the collateral usage of ZRX on Aave almost doubled, so that is an asset that we are monitoring during the upcoming period.

Parameter	Current Value	Recommended Value
ENJ Liquidation Threshold	65%	70%
DPI Loan To Value	55%	65%
DPI Liquidation Bonus	10.0%	8.5%
ZRX Loan To Value	65%	60%

See below volatility and exchange volume data from 10/14 to 10/21 that were important drivers for the updated parameter recommendations.

Symbol	10-21 Volatility	10-14 Volatility	Volatility Change	Weekly Average Daily Volume Change (%)
DPI	0.924661802	1.07082198	-0.146160178	96.2012726
ENJ	1.099162375	1.165823176	-0.518381803	40.9981913
ZRX	1.067526026	1.230865683	-0.163339657	-34.0377076

Risk Dashboard

The community should use Gauntlet's Risk Dashboard to better understand the updated parameter suggestions and general market risk in Aave V2.

Next Steps

• Targeting an AIP on 2021-10-25