Target Weight Mechanism doesn't make delta hedge easier

Ruichao Jiang and Long Wen

Papers from arXiv.org

Abstract: Chitra et al. (2025) claim that Target Weight Mechanism (TWM) in Perpetual Demand Lending Pools (PDLPs) can lower the delta of the portfolio under certain condition. We prove that their condition is self-contradictory. Furthermore, we prove an impossibility result that no TWM can lower the delta uniformly.

Date: 2026-04
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