Research Summary
The report discusses the progress of the Arcadia Collateral Risk Simulation, detailing the verification and validation processes, the progress made, and the goals for the upcoming week. It also provides a preview of the next update, which will focus on the borrower data model.
Key Takeaways
Simulation Verification & Validation
- Testing Extreme Scenarios: The Arcadia Simulation team created synthetic test cases with extreme values to identify potential weaknesses in the system. These cases are designed to push the system to its limits and are not necessarily based on real-world scenarios.
- Manual Inspection: The team also conducts manual inspections of the outputs produced by the system at the intermediate stages of the simulation. This step is crucial for understanding how the system progresses through its computations or simulations and where it might be introducing errors or exhibiting unexpected behavior.
Validation Procedure
- Observation Techniques and Statistical Tests: The validation procedure involves straightforward observation techniques and basic statistical tests to ensure the system mirrors real-world operations. This process involves generating and comparing key metrics such as the number of liquidations and the volume of liquidations against historical data from established platforms.
Goals for Week 7
- Comprehensive Simulation Coverage: The team aims to expand simulations to encompass all single assets and LP tokens, broadening the model’s applicability and insight range.
- Enhanced Log Visualization: The team plans to implement log visualization tools for better data interpretation and performance tracking.
- Refined Borrower Models: The team intends to develop detailed borrower models based on retrieved borrowing data to simulate diverse risk profiles.
Progress Report
- Simulation Refinement: The team has integrated slippage and gas costs into the profit calculations and implemented new optimization algorithms, enhancing the simulation’s accuracy and efficiency.
- Data Enrichment: A substantial increase in borrower data has been retrieved, including borrower data on major lending platforms on Base and Ethereum.
Actionable Insights
- Understanding Simulation Verification: Businesses and investors can learn from the Arcadia Simulation team’s approach to testing extreme scenarios. This method can be applied to other simulations to identify potential weaknesses and ensure robustness.
- Importance of Manual Inspection: The report highlights the importance of manual inspection in understanding how a system progresses through its computations or simulations. This insight can be useful for businesses in identifying areas of improvement in their systems.
- Value of Comprehensive Simulation Coverage: The team’s goal to expand simulations to encompass all single assets and LP tokens underscores the importance of comprehensive coverage in simulation models. This can provide businesses with a broader range of insights and applicability.
