| Publication type: | Working paper – expertise – study |
| Title: | Weighted variance swaps hedge against impermanent loss |
| Authors: | Fukasawa, Masaaki Maire, Basile Wunsch, Marcus |
| et. al: | No |
| DOI: | 10.2139/ssrn.4095029 |
| Extent: | 24 |
| Issue Date: | 2022 |
| Publisher / Ed. Institution: | SSRN |
| ISSN: | 1556-5068 |
| Language: | English |
| Subjects: | Decentralized exchange; Digital currency; Impairment loss; Weighted variance swap |
| Subject (DDC): | 332.6: Investment |
| Abstract: | Impermanent Loss, the discrepancy between the payoff of liquidity provision versus buy and hold, is sometimes referred to as the ’silent killer’ in Decentralized Finance. We describe how Impermanent Loss can be hedged in a Constant Function Market, both statically as well as dynamically. If the market is complete, the cost of this hedge constitutes the rational price of providing liquidity. We demonstrate that the appropriate hedging instrument against Impermanent Loss in a Constant Product Market lies between variance swaps and gamma swaps, and describe the class of Constant Function Markets whose Impermanent Loss can be hedged with weighted variance swaps. |
| URI: | https://digitalcollection.zhaw.ch/handle/11475/28379 |
| 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. (2022). Weighted variance swaps hedge against impermanent loss. SSRN. https://doi.org/10.2139/ssrn.4095029
Fukasawa, M., Maire, B. and Wunsch, M. (2022) Weighted variance swaps hedge against impermanent loss. SSRN. Available at: https://doi.org/10.2139/ssrn.4095029.
M. Fukasawa, B. Maire, and M. Wunsch, “Weighted variance swaps hedge against impermanent loss,” SSRN, 2022. doi: 10.2139/ssrn.4095029.
FUKASAWA, Masaaki, Basile MAIRE und Marcus WUNSCH, 2022. Weighted variance swaps hedge against impermanent loss. SSRN
Fukasawa, Masaaki, Basile Maire, and Marcus Wunsch. 2022. “Weighted Variance Swaps Hedge against Impermanent Loss.” SSRN. https://doi.org/10.2139/ssrn.4095029.
Fukasawa, Masaaki, et al. Weighted Variance Swaps Hedge against Impermanent Loss. SSRN, 2022, https://doi.org/10.2139/ssrn.4095029.
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