What Role Does Oracle Latency Play in Decentralized Derivatives Pricing and Arbitrage?

Oracle latency is the delay between a real-world price change and when that updated price is available on a decentralized exchange (DEX) or derivatives platform. High latency can lead to stale prices, creating opportunities for arbitrageurs to profit by trading against the outdated price.

This can also expose the derivatives platform to manipulation or significant losses. Low latency and high-frequency updates are crucial for maintaining fair market prices.