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Version: Current

Inventory Skewing

What happens if the market drops aggressively and the ABM accidentally buys too much of an asset, becoming dangerously Long?

In a standard AMM, the LP just holds the underwater bag. The ABM uses Inventory Skewing to shed risk profitably.

If the House Vault becomes over-exposed in one direction:

  1. The ABM automatically shifts its "Reservation Price" (the center point of its quotes).
  2. It aggressively adjusts its Bid and Ask prices to heavily favor the opposite side of the market.
  3. This signals the open market: "We will offer you a premium price to take this risk off our hands."
  4. Independent traders and arbitrageurs take the trade, flattening the House's inventory back to a safe, neutral state.

Instead of paying high fees to hedge risk externally, the ABM skews its prices so the market naturally hedges risk for LPs.