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First BitShares-sponsored research paper submitted for review

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R:
Great work biophil 👍

Supporting your worker proposal should be a high priority for all 👌

bitcrab:

--- Quote from: biophil on August 07, 2019, 03:47:00 pm ---
--- Quote from: bitcrab on August 06, 2019, 10:13:06 am ---have gone through the paper without checking exactly the derivation of the formulas, just try to find what sense does the conclusion make.

it seems:

it make sense to set MCR<1.53, to make the optimal collateral ratio "snaps" to the right.

while MCR<1.53, then either MSSR=1.01 or 1.005 make little difference.

anyway, as the conclusion based on a simple model, so we need to consider more factors to evaluate the effect while changing these parameters.

--- End quote ---

It depends on what you're trying to do, and you're right - more study is needed.

If your goal is to incentivize low collateral ratios (more borrowing), then you need to set MCR low enough (in the paper, less than 1.53) to get that to happen.

However, low collateral ratios intrinsically increase the risk of undercollateralization, which is something that should probably be avoided.

On the one hand, low MCR should lead to tighter pegging; on the other hand, low MCR should lead to more risk of undercollateralization. This suggests that there is a tradeoff between tight pegging and solvency, which needs to be studied further.

For the research, we're starting to work up more-expressive models that should help capture these tradeoffs more clearly.

--- End quote ---

Yes, I believe we need to incentivize more USD borrowing at this moment, that's why I suggest to change USD MCR to 1.5, unfortunately it hasn't gotten enough support.

Another factor is that with GS protection, we have minimized the pain of undercollateralization, in recent past we have watched that both bitCNY and bitUSD have experienced GS protection,  with no obvious impact to the market.

biophil:

--- Quote from: bitcrab on August 06, 2019, 10:13:06 am ---have gone through the paper without checking exactly the derivation of the formulas, just try to find what sense does the conclusion make.

it seems:

it make sense to set MCR<1.53, to make the optimal collateral ratio "snaps" to the right.

while MCR<1.53, then either MSSR=1.01 or 1.005 make little difference.

anyway, as the conclusion based on a simple model, so we need to consider more factors to evaluate the effect while changing these parameters.

--- End quote ---

It depends on what you're trying to do, and you're right - more study is needed.

If your goal is to incentivize low collateral ratios (more borrowing), then you need to set MCR low enough (in the paper, less than 1.53) to get that to happen.

However, low collateral ratios intrinsically increase the risk of undercollateralization, which is something that should probably be avoided.

On the one hand, low MCR should lead to tighter pegging; on the other hand, low MCR should lead to more risk of undercollateralization. This suggests that there is a tradeoff between tight pegging and solvency, which needs to be studied further.

For the research, we're starting to work up more-expressive models that should help capture these tradeoffs more clearly.

bitcrab:
have gone through the paper without checking exactly the derivation of the formulas, just try to find what sense does the conclusion make.

it seems:

it make sense to set MCR<1.53, to make the optimal collateral ratio "snaps" to the right.

while MCR<1.53, then either MSSR=1.01 or 1.005 make little difference.

anyway, as the conclusion based on a simple model, so we need to consider more factors to evaluate the effect while changing these parameters.

biophil:

--- Quote from: abit on August 03, 2019, 12:17:20 pm ---I convinced cn-vote to vote for the worker.

--- End quote ---

Many thanks for your support!

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