2024/05/29 by Corinne Powers, Powers, Corinne · 1 citation
Economics, Econometrics and Finance · #Capital Investment and Risk Analysis
paper · pdf · doi:10.48550/arxiv.2405.18728
Automated market makers with concentrated liquidity capabilities are programmable at the tick level. The maximization of earned fees, plus depreciated reserves, is a convex optimization problem whose vector solution gives the best provision of liquidity at each tick under a given set of parameter estimates for swap volume and price volatility. Surprisingly, early results show that concentrating liquidity around the current price is usually not the best strategy.