Impermanent Loss

Example Table of Impermament Loss in Uniswap v3 (and v2)

⁠
⁠
⁠

Summary:

If you have a range of 75%-125% (example $1500 - $2500 @ETH:$2000),

then a 20% decrease in price will incur a -4.75% IL

then a 20% increase in price will incur a -3.8% IL

Further more everything that is above your price range, you incur 100% IL since you do not have any of these assets.

⁠

Impermanent Loss: Various Liquidity Positions

⁠

Impermanent Loss: Risk Profile @ 80%-120% Liquidity Position

⁠

Figure 8 shows the corresponding impermanent loss of a [80%, 120%] range liquidity provider. We note here that a liquidity provider portfolio risk profile is always at a disadvantage to a buy and hold portfolio. Some websites interactive calculators erroneously show a risk profile that indicate that you will lose less than a buy and hold portfolio. This is not the case. In essence as exhibited by the PNL profile, Figure 7 and Figure 8, it is similar to being synthetically short variance (short Gamma) on the underlying, earning Theta (yield). Extreme spot price moves will manifest this short gamma; in further papers we will discuss periodic delta hedging strategies and short dated puts to ameliorate and subdue the risk characteristics endemic in the form of liquidity positions discussed in this paper.

Research Paper

⁠

Loading…⁠

⁠

Want to print your doc?
This is not the way.

Try clicking the ⋯ next to your doc name or using a keyboard shortcut (

CtrlP