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Quantitative Finance · Begrippenlijst

Wat is Concentrated liquidity?

Definition 20.4 Markets III: Commodities, Energy and Crypto · Hoofdstuk 20 — Automated Market Makers

Concentrated liquidity is liquidity provided to an automated market maker over a chosen price range only: the position behaves as a constant-product pool with a larger virtual reserve while the price is inside the range, and holds only one of the two tokens when the price is outside it.

Impermanent loss: value of a liquidity position against simply holding the tokens deposited, after the price moves by a factor, for a full-range constant-product position and for concentrated positions over ±50\% and ±10\% around the entry price. The narrower the range, the faster the loss accrues; outside the range the position holds only the token that has lost value against the other. Data: the chapter’s tutorial.
Figure 20.1. Impermanent loss: value of a liquidity position against simply holding the tokens deposited, after the price moves by a factor, for a full-range constant-product position and for concentrated positions over ±50%\pm50\% and ±10%\pm10\% around the entry price. The narrower the range, the faster the loss accrues; outside the range the position holds only the token that has lost value against the other. Data: the chapter’s tutorial.
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