Conference Agenda

Session

Session 210

Time:

Friday, 05/June/2026:

3:00pm - 3:15pm

Location: Chili

Presentations

Implied Impermanent Loss for Concentrated Liquidity

Luca Alberici¹, Andrew Papanicolaou², Lorenzo Schoenleber³

¹Bayes Business School; ²North Carolina State University; ³Collegio Carlo Alberto

Providing liquidity on decentralized exchanges earns fees but exposes liquidity providers (LPs) to impermanent loss from price movements. With concentrated liquidity, LPs control this risk by choosing how narrowly to deploy capital around the price. Using option prices, we quantify the cost of liquidity provision by developing measures of implied and realized impermanent loss for concentrated liquidity and define the associated impermanent loss risk premium. Empirically, higher expected impermanent loss widens liquidity ranges, while higher risk premia re-center liquidity around the spot price, highlighting opposing effects of risk and compensation.