*this* is missing the key part of IL.
If price of A/B goes from 200 - 190 and you’re AMM-ing A/B, you don’t buy A @ $190. You buy it at $200.
The problem with IL isn’t the mean reverting met. It’s that you get picked off to moves, trading post-move at the pre-move price. t.co/cHh5xRu6uf
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Have seen you incorrectly say this a few times now.
You don't buy at 200 or 190. You buy a fractional amount at every price between the two for an average execution rate somewhere in between.
In a $100M pool a trade from $200 to $190 executes at an average rate of $194.94
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Yes - this is so exactly correct that I'm mystified why SBF (who's certainly up to the math) is contradicting it. Maybe he means sthg else?
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was being lazy, is mostly correct, though it doesn't change answer much -- the buys @ 200 are bad, the buys at 190 are break-even.
I don't really understand your point here. Any market maker buys when people sell: that's pretty much the definition.
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So you're buying as price drops, and you know it's possible (likely, even) it keeps dropping and you'll take a loss (at least temporarily!).
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