AMM Price Impact Calculation

AMM price impact calculation is the mathematical determination of how a specific trade will move the price of an asset within a liquidity pool. Automated Market Makers use constant product formulas where the price is a function of the pool's reserves.

Searchers must precisely calculate this impact to predict the outcome of their own trades and those of others. This is fundamental to identifying arbitrage opportunities and planning sandwich attacks.

Incorrect calculations lead to suboptimal execution and potential financial loss. It is a core skill in the quantitative analysis of decentralized exchange mechanics.