kaal:claim:3396542-022

A sufficiently large negative shock to the number of policies issued per period drives the value of the DAO negative and renders the DAO insolvent, so falling new business volume is a principal insolvency channel.

Thus, if ε0 is sufficiently negative and large in magnitude (i.e., if there is a sufficiently large decrease in M), then the value of DAO will become negative and the DAO will become insolvent.

Craig Calcaterra, Wulf A. Kaal, Vadhindran K. Rao, Decentralized Underwriting (2019), V. MODEL, 3. DAO Insolvency, p. 21
https://ssrn.com/abstract=3396542 · source PDF

Craig Calcaterra, Wulf A. Kaal, Vadhindran K. Rao, Decentralized Underwriting (2019). SSRN: https://ssrn.com/abstract=3396542

• Mt follows a random walk
• one time large decrease in M

failuresupport: arguedfailure: Insolvency from sharp decline in policy issuancefamily: valuation-and-pricing-failuredao

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