So, let me summarize my understanding. We basically have three parameters available that we can use
towards fulfilling our optimization criteria:
* settlement price (price feed) - This is the price that is used for margin calls as well as force settlements.
* MSSR - the max premium a shorter needs to pay (from market) in case of margin call
* MCR - The minimum collateral necessary for call positions, if lower -> margin call
Essentially, we can apply a "feedback loop" on all of them, either by "derailing the price feed", tuning MSSR or MCR.
The main motivation for "detailing the price feed" is because the MSSR as well as the MCR are lower bounded by 100.1%
and thus cannot go lower. A "tuning" of the price feed could lead to reduction of the premium beyond what could be
possible by tuning MSSR or MCR.
Now, the question (at least to me) is, where is the "premium" and how can we lower it, best?
I would like to see how well this approach would work:
* Feed: price feed with a fixed 1% offset from the "fair price" (fixed tuning) - this way, we allow bitasset buyers to outcompete margin calls and have margin calls provide liquidity at 1% 'discount'
* MSSR: at 100% if premium >=0%, else (100-premium*penalty)% if premium <0 (feedback) - this way, we cause margin calls to raise the price in case there is a discount - "penalty" would cause the margin call to pay a premium
* MCR: dynamic MCR at max(130, 170 - 40 * (premium/5%))% (feedback) - this way, we have a MCR of 170% in case of 0% premium which groes if the premium is <0% and shrinks towards 130% (linearily) in case of premium >0%
The only thing that I am not sure about is if this approach may not lead to more and more margin calls piling up at the settlement
price with not incentive provided to sell into them - unless the external "premium" is negative ...
Thoughts?