| Publication type: | Working paper – expertise – study |
| Title: | Model-free hedging of impermanent loss in geometric mean market makers |
| Authors: | Fukasawa, Masaaki Maire, Basile Wunsch, Marcus |
| et. al: | No |
| DOI: | 10.2139/ssrn.4397904 |
| Extent: | 21 |
| Issue Date: | 2023 |
| Publisher / Ed. Institution: | SSRN |
| ISSN: | 1556-5068 |
| Language: | English |
| Subjects: | Automated market maker; Decentralized exchange; Digital currency; Divergence loss |
| Subject (DDC): | 332.6: Investment |
| Abstract: | We consider Geometric Mean Market Makers – a special type of Decentralized Exchange – with two types of users: liquidity takers and arbitrageurs. Liquidity takers trade at prices that can create arbitrage opportunities, while arbitrageurs align the exchange’s price with the external market price. We show that in Geometric Mean Market Makers charging proportional transaction fees, Impermanent Loss can be super-hedged by a model-free rebalancing strategy. Moreover, we demonstrate that in such a DEX, the exchange rate is of finite variation, so that loss-versus rebalancing (the shortfall of providing liquidity versus the corresponding constant-weights portfolio) vanishes. |
| URI: | https://arxiv.org/pdf/2303.11118.pdf https://digitalcollection.zhaw.ch/handle/11475/28378 |
| License (according to publishing contract): | Licence according to publishing contract |
| Departement: | School of Management and Law |
| Organisational Unit: | Institute of Wealth & Asset Management (IWA) |
| Appears in collections: | Publikationen School of Management and Law |
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Fukasawa, M., Maire, B., & Wunsch, M. (2023). Model-free hedging of impermanent loss in geometric mean market makers. SSRN. https://doi.org/10.2139/ssrn.4397904
Fukasawa, M., Maire, B. and Wunsch, M. (2023) Model-free hedging of impermanent loss in geometric mean market makers. SSRN. Available at: https://doi.org/10.2139/ssrn.4397904.
M. Fukasawa, B. Maire, and M. Wunsch, “Model-free hedging of impermanent loss in geometric mean market makers,” SSRN, 2023. doi: 10.2139/ssrn.4397904.
FUKASAWA, Masaaki, Basile MAIRE und Marcus WUNSCH, 2023. Model-free hedging of impermanent loss in geometric mean market makers [online]. SSRN. Verfügbar unter: https://arxiv.org/pdf/2303.11118.pdf
Fukasawa, Masaaki, Basile Maire, and Marcus Wunsch. 2023. “Model-Free Hedging of Impermanent Loss in Geometric Mean Market Makers.” SSRN. https://doi.org/10.2139/ssrn.4397904.
Fukasawa, Masaaki, et al. Model-Free Hedging of Impermanent Loss in Geometric Mean Market Makers. SSRN, 2023, https://doi.org/10.2139/ssrn.4397904.
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