You might have experience as a programmer but I take it you're not a systems guy. Find someone who is and have them draft the spec. You might not be familiar with hedging algorithms but you've got one implemented for the currency stabilization process. Either find one and have them write a paper for you or dig up what the finance guys have in their literature and refer to it. You don't have a bibliography and that's a bad thing, there is a whole lot here that is not novel and needs to be referenced so everyone knows you're not butting heads with what's generally held to be true. tl;dr shoddy work designed by the clueless and implemented by the fools that follow them, stay away
There is more to this than hedging. You can reduce the risk of escrow fund exhaustion to zero and still fail to create a mastercoinUSD that is actually worth one USD.
Perfectly stable mastercoinUSD will sell for more than one USD. After all they teleport, real USD bills don't.
If I made USD bills that could teleport, would you pay face value for it? or would you be willing to pay a premium?
What if the network expanded so that you could use my teleporting USD in more places, wouldn't the premium increase?
At the same time unstable mastercoinUSD can sell for less than one USD. After all, they are exchangeable for at most one USD in mastercoin.
If the escrow fund runs dry, they are exchangeable for less than one USD in mastercoin. So their market price will decrease as the amount of backing falls.
The whole point is to achieve parity with the USD.