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Trade Limiting Parameters

IVTwapPeriod

Value
  • IVTwapPeriod: 6 hours
Meaning/Justification
  • This is the length of the GWAV used in ForceClose() and liquidations.

SkewTWAPPeriod

Value
  • SkewTwapPeriod: 6 hours
Meaning/Justification
  • This is the length of the GWAV used in ForceClose() and liquidations.

ShortVolShock

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.

ShortPostCutoffVolShock

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.

LongVolShock

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.

LongPostCutoffVolShock

Value
  • LongPostCutoffVolShock: 0.5
Meaning/Justification
  • Increase the penalty given by LongVolShock when the time to expiry is less than the trading cutoff.

LiquidateVolShock

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.

LiquidatePostCutoffVolShock

Value
  • LiquidatePostCutoffVolShock: 1.45
Meaning/Justification
  • Increase the penalty given by LiquidatePostCutoffVolShock when the time to expiry is less than the trading cutoff.

ShortSpotMin

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.

LiquidateSpotMin

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.