Author Topic: Margin Call Explanation & Beware of Illiquid Markets with Low Margin  (Read 16277 times)

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Offline tonyk

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Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline tonyk

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Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline bytemaster



A margin call will occur any time the highest bid is less than the CALL PRICE and greater than SQP

FEED = Settlement Price
SWAN = DEBT / COLLATERAL  - the point at which the network is insolvent.
CALL   = SWAN * 1.75
SQP   = FEED / 1.5

1.75 and 1.5 are specified as two parameters to the price feed. 

If you would like the feed to provide additional protection to the shorts, then ask the witnesses to adjust their feed publishing scripts to use SQP of FEED / 1.1.

Just beware that the consequence of protecting the shorts against thin markets is the following:

1. Shorts will end up posting less collateral
2. Greater dependence upon the feed vs the market
3. If there are no bids above the SQP price then margin will not get called even if the Feed Price is below the Call price.

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Anything said on these forums does not constitute an intent to create a legal obligation or contract between myself and anyone else.   These are merely my opinions and I reserve the right to change them at any time.