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A Tick-by-Tick Solution for Concentrated Liquidity Provisioning (2405.18728v1)
Published 29 May 2024 in q-fin.PM and q-fin.GN
Abstract: 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.