---
# System prepended metadata

title: 'MIP 24 Apollo Reserve Factor Recs, Risk Parameter Recs (2023-02-07)'

---


# MIP 24 Apollo Reserve Factor Recs, Risk Parameter Recs (2023-02-07)

## Apollo Summary
We recommend the following parameter changes:

- **Increase USDC.multi collateral factor from 64.0% to 66.0%.**
- **Increase USDT.multi collateral factor from 42.0% to 44.0%.**

The VaR is $0 and our recommendations will leave it unchanged. The LaR is $477k and our recommendations will leave it unchanged. FRAX has a VaR of $0 and a LaR of $23k. USDC.multi has a VaR of $0 and a LaR of $448k. USDT.multi has a VaR of $0 and a LaR of $83. WMOVR has a VaR of $0 and a LaR of $5k. ETH.multi and xcKSM both have a VaR and LaR of $0. 

USDC.multi and USDT.multi are relatively safe from a market risk perspective, so can have their collateral factors gradually increased to improve capital efficiency. ETH.multi, FRAX, WMOVR, and xcKSM's collateral factors are effectively balancing risk and capital efficiency. 

### Reserve Factor Recommendations
Our recommendation for reserve factors would be to standardize them for the purpose of consistency and to align with market rates. We recommend using a reserve factor of 15% for stablecoins and 25% for volatile assets as this matches the reserve factors used by similar protocols and would result in minimal change across the different protocol assets. We do not expect the Reserve Factor to require changes frequently, though if reserve levels change, we will consider adjusting RFs again. The current proposed changes (as of Jan 24th) are summarized in the table below.

| Protocol | Asset      | Current RF | Proposed RF | Current Reserves | Current Supply |
| -------- | ---------- | ---------- | ----------- | ---------------- | -------------- |
| Apollo   | MOVR       | 20%        | 25%         | $167,247         | $3,060,531     |
|          | xcKSM      | 25%        | 25%         | $72,672          | $1,918,220     |
|          | FRAX       | 20%        | 15%         | $226,203         | $8,130,201     |
|          | USDT.multi | 20%        | 15%         | $95,338          | $2,519,001     |
|          | USDC.multi | 15%        | 15%         | $282,184         | $16,204,339    |
|          | ETH.multi  | 25%        | 25%         | $126,813         | $9,779,502     |
|          | BTC.multi  | 25%        | 25%         | $15,949          | $87,691        |

## Methodology
This set of parameter updates seeks to maintain the overall risk tolerance of the protocol while making risk trade-offs between specific assets.

Gauntlet’s parameter recommendations are driven by an optimization function that balances 3 core metrics: insolvencies, liquidations, and borrow usage. Parameter recommendations seek to optimize for this objective function. Our agent-based simulations use a wide array of varied input data that changes on a daily basis (including but not limited to asset volatility, asset correlation, asset collateral usage, DEX / CEX liquidity, trading volume, expected market impact of trades, and liquidator behavior). Gauntlet’s simulations tease out complex relationships between these inputs that cannot be simply expressed as heuristics. As such, the input metrics we show below can help understand why some of the param recs have been made but should not be taken as the only reason for recommendation. To learn more about our methodologies, please see the Helpful Links section at the bottom. 

## Supporting Data

The below figures show trends on key market statistics regarding borrows and utilization that we will continue to monitor: 



### Top 10 Borrowers’ Aggregate Positions & Borrow Usages
![](https://i.imgur.com/3H67QZ3.png)




### Top 10 Borrowers’ Entire Supply
![](https://i.imgur.com/3Lu3cow.png)



### Top 10 Borrowers’ Entire Borrows
![](https://i.imgur.com/WyDgoIs.png)



### Utilization Rate Over Time
![](https://i.imgur.com/b5D64Yn.png)

### Borrow Cap Utilization
![](https://i.imgur.com/QRXDmc3.png)


## Risk Dashboard

The community should use [Gauntlet’s Apollo Risk Dashboard](https://gov.gauntlet.network/apollo) to better understand the updated parameter suggestions and general market risk in Apollo. 

Value at Risk represents the 95th percentile **insolvency value** that occurs from simulations we run over a range of volatilities to approximate a tail event.

Liquidations at Risk represents the 95th percentile **liquidation volume** that occurs from simulations we run over a range of volatilities to approximate a tail event.
![](https://i.imgur.com/2otSq1e.png)


## Quick Links

*Please click below to learn about our methodologies:*

[Gauntlet Parameter Recommendation Methodology](https://medium.com/gauntlet-networks/gauntlets-parameter-recommendation-methodology-8591478a0c1c)
[Gauntlet Model Methodology](https://medium.com/gauntlet-networks/gauntlets-model-methodology-ea150ff0bafd)

*By approving this proposal, you agree that any services provided by Gauntlet shall be governed by the terms of service available at gauntlet.network/tos.*
