Lyra Finance is a project within the Synthetix ecosystem, an options market built on Optimism and Arbitrum. The protocol employs a pool-to-pool trading model, where liquidity providers (LPs) act as counterparties to options and share in the transaction fees. Building upon the Black-Scholes model, the Lyra Automated Market Maker (AMM) model considers the impact of options supply and demand on price, adjusting the implied volatility through various parameters. This acts as a balance for uncovered positions, preventing excessive one-sided positions from causing LP losses.
The team has introduced dynamic fees and relevant circuit breaker mechanisms for LP risk management. The official website integrates Synthetix and GMX protocols, enabling LPs to hedge their own trades and achieve near delta neutrality in their risk exposure.