# kaal:claim:3396542-023

**Claim.** 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.

**Type.** failure  **Support.** argued

**Holds when.**

- insolvency triggered by a negative shock to policy issuance

**Source quote.**

> 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.

**From.** Craig Calcaterra, Wulf A. Kaal, Vadhindran K. Rao, *Decentralized Underwriting* (2019), V. MODEL, 3. DAO Insolvency, page 21

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

**Verify.** sha256 of source PDF `ce2bda03a0b788ea3e7747f02c3c351ef7c808a41150d5cda34767bbe98800c0` at https://raw.githubusercontent.com/wulfkaal/Academic-Papers/main/papers/pdf/Calcaterra%20et%20al.%20-%202019%20-%20Decentralized%20Underwriting.pdf

**Failure mode.** Margin increase remedy constrained by demand response  (family: valuation-and-pricing-failure)

**Topics.** institutional-design

**Keywords.** remedy-limits, margin, demand-response, insolvency

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