Comment on page
Risk-Adjusted Automated Market Maker
Vest Exchange employs an AMM which matches buyers (longs) and sellers (shorts) asynchronously, thereby allowing the existence of temporary imbalance (inventory).
In order to address the risk arising from holding such inventory, the AMM charges premium or gives rebate based on each position's marginal contribution to the risk. Additionally, funding mechanism ensures the AMM to cover for any residual risk that the premium or rebate fails to capture. For more information, see the technical section.