Trade Limiting Parameters
Value
- IVTwapPeriod: 6 hours
Meaning/Justification
- This is the length of the GWAV used in ForceClose() and liquidations.
Value
- SkewTwapPeriod: 6 hours
Meaning/Justification
- This is the length of the GWAV used in ForceClose() and liquidations.
Value
- ShortVolShock: 1.2
Meaning/Justification
- When a user buys back a short using ForceClose(), the price of the option has to be computed. Using the current value of the trading volatility given by the AMM is exploitable, and so a GWAVed value must be used.
- To increase edge for the AMM, the GWAVed volatility is multiplied by ShortVolShock.
- The user then (usually) pays slightly more for the option than what would normally be quoted.
Value
- ShortPostCutoffVolShock: 1.5
Meaning/Justification
- Increase ShortVolShock when the time to expiry is less than the trading cutoff time (currently 6 hours).
- Trades that occur very close to expiration have a higher chance of being unfavourable to the AMM and so to ensure edge, the penalty to the GWAV volatility should be increased.
Value
- LongVolShock: 0.8
Meaning/Justification
- When a user sells back a long using ForceClose(), the AMM penalizes them by decreasing the GWAV using LongVolShock. The reasoning is analogous to ShortVolShock.
Value
- LongPostCutoffVolShock: 0.5
Meaning/Justification
- Increase the penalty given by LongVolShock when the time to expiry is less than the trading cutoff.
Value
- LiquidateVolShock: 1.15
Meaning/Justification
- When a user is liquidated on a partially collateralized short, they must buy back their option. The GWAV used to compute the price of the option must be penalized to increase edge for the AMM.
Value
- LiquidatePostCutoffVolShock: 1.45
Meaning/Justification
- Increase the penalty given by LiquidatePostCutoffVolShock when the time to expiry is less than the trading cutoff.
Value
- ShortSpotMin: 0.01 (1%)
Meaning/Justification
- When a user closes a short with ForceClose(), the AMM will sell back the option at a minimum of ShortSpotMin times the spot price of the option (since Black Scholes breaks down at very large/low deltas).
- This increases the AMM's edge.
Value
- LiquidateSpotMin: 0.01 (1%)
Meaning/Justification
- As with ForceClose(), when a user is liquidated and has their position closed, the AMM will sell back the option at a minimum of LiquidateSpotMin times the spot price of the option.
- This increases the AMM's edge.
Last modified 8mo ago