Delta Hedging Liquidity Positions on Automated Market Makers

@article{Khakhar2022DeltaHL,
  title={Delta Hedging Liquidity Positions on Automated Market Makers},
  author={Akhilesh Khakhar and X. Chen},
  journal={ArXiv},
  year={2022},
  volume={abs/2208.03318}
}
Liquidity Providers on Automated Market Makers generate millions of USD in transaction fees daily. However, the net value of a Liquidity Position is vulnerable to price changes in the underlying assets in the pool. The dominant measure of loss in a Liquidity Position is Impermanent Loss. Impermanent Loss for Constant Function Market Makers has been widely studied. We propose a new metric to measure Liquidity Position PNL based on price movement from the underlying assets. Compared to…