@h7538t

How do risk-loading techniques from finance inform slashing multiplier design? Risk-loading techniques from finance, particularly from insurance and credit risk, provide a sophisticated framework for moving beyond simple expected value calculations. The core idea is to price risk based on its statistical properties, not just its mean. A key technique is risk-adjusted capital allocation, akin to Solvency II in insurance. Here, the required capital (or in our case, the reward) is determined by the Value at Risk (VaR) or Conditional Value at Risk (CVaR) of the slashing distribution. A fat-tailed risk with a low probability but high severity demands a much higher multiplier than its expected value suggests. Furthermore, finance teaches us to load for parameter uncertainty—since the estimated slashing probability is itself uncertain, the multiplier must include a "parameter risk premium." Finally, techniques for pricing illiquid and non-diversifiable risks directly apply

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