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Glossary
Collateral
Staking something of value against a loan guarantees that the person taking the loan will complete repayment.
Hedging
Hedging, in general, refers to combining an original position with another in order to render the values of users’ combined portfolio less sensitive to the risk (impermanent loss) being analyzed.
Impermanent Loss
Impermanent loss is the difference between holding tokens in an AMM liquidity pool and holding them in your wallet.
It occurs when the price of tokens inside an AMM diverges in any direction. The more divergence, the greater the impermanent loss.
Impermanent loss is “impermanent” because as long as the relative values of tokens in the AMM return to their original prices when you entered the positions, the loss is reduced and you can receive a higher share of trading fees. This scenario is rarely seen since impermanent often matures into permanent loss, reducing the overall return from trading fees and liquidity mining rewards, leaving participants with little to no yields.
Isolated Margin
The margin balance is allocated to a position. Traders can manage risk by restricting the amount allocated to each position.
Liquidity Pools
Liquidity pools are automated market-maker (AMM) smart contracts that exchange assets algorithmically using on-chain reserves. They turn pooled market-maker liquidity into an asset class (“liquidity positions”), allowing for broader, more competitive involvement in market-making.
MultiSignature
A MultiSignature wallet or MultiSig Wallet requires another party to authorize a transaction before it is broadcasted to the network.
Options
Options are a class of derivatives contracts, widely used in traditional finance to hedge against asset price fluctuations for settlement at a predetermined expiration date in the future.
Put Options
A put option gives the owner/buyer the right to sell an asset, at a specified price, by a predetermined date to the seller of the put option. This means that no matter how low the price of an asset goes, the investor has the right to sell the asset for the agreed-upon price
Staking Pool
A staking pool allows multiple stakeholders (or bagholders) to combine their computational resources as a way to increase their chances of being rewarded.
Volatility
The speed and volume by which the price of an asset changes. Volatility is calculated in terms of standard deviation in the annual turn of an asset over a set period of time.
Last modified 1yr ago