How Does the Concept of “Divergence Loss” Relate to Impermanent Loss?
"Divergence loss" is simply an alternative, and perhaps more descriptive, term for impermanent loss. It emphasizes that the loss is caused by the divergence of the token's price ratio from the ratio at the time of deposit.
It highlights the core mechanism: the loss is a function of how far the current price ratio has moved from the initial ratio. The term "impermanent" is used because the loss vanishes if the ratio returns to the original state, while "divergence" focuses on the cause.
Glossar
Divergence Loss
Discrepancy ⎊ Divergence Loss, within cryptocurrency derivatives, represents the quantifiable difference between an implied future price movement ⎊ derived from options pricing models ⎊ and the realized price movement of the underlying asset.
Price Ratio
Ratio ⎊ A price ratio is a quantitative metric used to compare the value of one asset relative to another.
Divergence
Analysis ⎊ In quantitative analysis, divergence represents a critical discrepancy between the direction of an asset's price action and the associated technical indicator, such as the Relative Strength Index or MACD.