A General Framework for Impermanent Loss in Automated Market Makers
Trading and Market Microstructure
2022-03-23 v1
Abstract
We provide a framework for analyzing impermanent loss for general Automated Market Makers (AMMs) and show that Geometric Mean Market Makers (G3Ms) are in a rigorous sense the simplest class of AMMs from an impermanent loss viewpoint. In this context, it becomes clear why automated market makers like Curve ([Ego19]) require more parameters in order to specify impermanent loss. We suggest the proper parameter space on which impermanent loss should be considered and prove results that help in understanding the impermanent loss characteristics of different AMMs.
Cite
@article{arxiv.2203.11352,
title = {A General Framework for Impermanent Loss in Automated Market Makers},
author = {Neelesh Tiruviluamala and Alexander Port and Erik Lewis},
journal= {arXiv preprint arXiv:2203.11352},
year = {2022}
}
Comments
24 pages, 5 figures