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arbitrageur.py
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arbitrageur.py
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class Arbitrageur:
def __init__(self, twamm):
self.twamm = twamm
self.x_balance = 0
self.y_balance = 0
self.price_before_arb = None
def do_arb(self, block_number, true_price):
x_to_spend, y_to_spend = self.find_arb(block_number, true_price)
self.x_balance -= x_to_spend
self.y_balance -= y_to_spend
res = self.twamm.trade_with_internal_amm(block_number, x_to_spend, y_to_spend)
self.x_balance += res.x_out
self.y_balance += res.y_out
def get_x_profit(self, true_price):
return float(self.x_balance + true_price * self.y_balance)
# assuming no fee
def find_arb(self, block_number, true_y_price):
# Advance TWAMM to the current block
# An arbitrageur obviously wouldn't do this on-chain. Instead they'd calculate the state themselves off-chain
# based on the block number.
self.twamm.process_virtual_trades(block_number)
amm = self.twamm.amm
self.price_before_arb = amm.instantaneous_y_price()
# see https://research.paradigm.xyz/LP_Wealth.pdf
if true_y_price > amm.x_reserves / amm.y_reserves:
x_to_spend = max(
amm.x_reserves
* ((true_y_price * amm.y_reserves / amm.x_reserves) ** (1 / 2) - 1),
0,
)
return [x_to_spend, 0]
elif true_y_price < amm.x_reserves / amm.y_reserves:
y_to_spend = max(
amm.y_reserves
* ((1 / true_y_price * amm.x_reserves / amm.y_reserves) ** (1 / 2) - 1),
0,
)
return [0, y_to_spend]
else:
return [0, 0]