With the exception of the use of Auto-deleveraging (ADL), we execute some manual management to protect our insurance funds (e.g., regular rebalance, maintenance and initial margin adjustment).
There are three key methods we use to protect our insurance funds.
Insurance Fund Rebalance
We track the P&L of each insurance fund.
On a regular basis, we rebalance among different insurance funds if some of them incurred profits and others incurred loss, i.e.,
Take the sum of the profits earned by the insurance funds (in profit)
Allocate this amount of profits to the other insurance funds (in loss) in proportion to their loss
Trigger ADL
We can also trigger ADL to better protect the insurance fund when it has just gone bankrupt or its balance has significantly dropped in the past few hours. Doing so will not liquidate the positions on the order book.
Maintenance and Initial Margin Adjustment
We track each liquidation in the past:
Contract
Size which has been liquidated
Profit or loss incurred to the insurance fund
Considering a contract with a history of frequent losses in its insurance fund, we may increase the MMR & IMR in the future.