{"aip":42,"title":"Risk Parameter Updates 2021-10-14","status":"Proposed","author":"Nick Cannon, Watson Fu, Paul Lei","shortDescription":"A proposal to adjust nine (9) total risk parameters across eight (8) Aave V2 assets.","discussions":"https://governance.aave.com/t/arc-risk-parameter-updates-2021-10-14/5888","created":"2021-10-18T00:00:00.000Z","preview":"## Simple Summary\n\nA proposal to adjust nine (9) total risk paramters …","basename":"AIP-42","description":"## Simple Summary\n\nA proposal to adjust nine (9) total risk parameters across eight (8) Aave V2 assets including LTV, Liquidation Threshold, and Liquidation Bonus.\n\n\n## Abstract\nThis proposal is a batch update of three risk parameters to align with the the [Moderate risk level](https://snapshot.org/#/aave.eth/proposal/QmT9T4Rfnh1Z2HYmMPXvtFotMK2vSxiXK8dKStg2b6n4gi) chosen by the Aave community. These paramater updates are a continuation of Gauntlet's regular parameter recommendations, the latest being [AIP-40: Risk Parameter Updates 2021-10-07](https://app.aave.com/governance/40-QmSvHc7UezXJwMoMnHcJTb2Hb6dRR2ZW2rfmwjkUwVoM4m).\n\n\n## Motivation\n\nThis 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 Gauntlet's most recent [Monthly Risk Report](https://governance.aave.com/t/market-risk-monthly-updates-and-review-october-2021/5887).\n\n\n## Specification\n\n\n| Parameter | Current Value | Recommended Value |\n| -------- | -------- | -------- |\n| BAT Liquidation Threshold    | 75%     | 80%     |\n| CRV Loan To Value     | 35%     | 45%     |\n| CRV Liquidation Threshold    | 55%     | 60%     |\n| ENJ Loan To Value     | 55%     | 60%     |\n| REN Loan To Value     | 50%     | 55%     |\n| SUSHI Loan To Value    | 30%     | 45%     |\n| UNI Loan To Value     | 55%     | 60%     |\n| WBTC Liquidation Bonus    | 7.5%     | 6.5%     |\n| YFI Liquidation Bonus     | 8%     | 7.5%     |\n\n\nSee below volatility and exchange volume data from 10/07 to 10/14 that were important drivers for the updated parameter recommendations.\n\n|Symbol| 10-14 Volatility| 10-07 Volatility| Volatility Change| Weekly Average Daily Volume Change (%)  |\n|------|---------------|---------------|-----------------|------------|\n|BAT   |0.929440262    |1.26231086     |-0.332870598     |-5.5534425|\n|CRV   |1.680964856    |2.06913145     |-0.388166594     |-20.9446652|\n|ENJ   |1.165823176    |1.684204979    |-0.518381803     |-27.1658359|\n|REN   |1.826713874    |2.073377777    |-0.246663903     |-49.2642672|\n|SUSHI |1.521203501    |1.831060432    |-0.309856931     |-17.0524519|\n|UNI   |1.328292578    |1.625790476    |-0.297497898     |-45.1124435|\n|WBTC  |0.694701853    |0.83363382     |-0.138931967     |50.5601238 |\n|YFI   |1.038356955    |1.240436029    |-0.202079074     |81.6590629 |\n\n\n## Risk Dashboard\n\n\n\nThe community should use Gauntlet's [Risk Dashboard](https://gov.gauntlet.network/aave) to better understand the updated parameter suggestions and general market risk in Aave V2. \n\n\n![](https://i.imgur.com/vCKAm9P.png)\n\n## Implementation \n\nThe proposal sets the LTV, liquidation bonuses, and liquidation threshold ratios by calling `configureReserveAsCollateral` on the `LendingPoolConfigurator` contract at `0x311Bb771e4F8952E6Da169b425E7e92d6Ac45756`, using the address and parameters specific to each token.\n\nThe full list of parameter updates can be found in the [forum](https://governance.aave.com/t/arc-risk-parameter-updates-2021-10-14/5888).\n\n## Copyright\n\nCopyright and related rights waived via [CC0](https://creativecommons.org/publicdomain/zero/1.0/)."}