kaal:claim:3396542-023

Raising the margin is the available remedy for an insolvency shock, but it is not a clean fix because the effect of a higher margin on future demand must itself be considered.

Of course, a remedial course of action that could perhaps be taken in period 0 is to increase the margin m if that is possible. However, we would need to consider the impact of an increase in the margin on future demand.

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

• insolvency triggered by a negative shock to policy issuance

failuresupport: arguedfailure: Margin increase remedy constrained by demand responsefamily: valuation-and-pricing-failureinstitutional-design

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