Related papers: Improved Price Oracles: Constant Function Market M…
In most OTC markets, a small number of market makers provide liquidity to other market participants. More precisely, for a list of assets, they set prices at which they agree to buy and sell. Market makers face therefore an interesting…
Volume imbalance in a limit order book is often considered as a reliable indicator for predicting future price moves. In this work, we seek to analyse the nuances of the relationship between prices and volume imbalance. To this end, we…
We introduce a class of utility-based market makers that always accept orders at their risk-neutral prices. We derive necessary and sufficient conditions for such market makers to have bounded loss. We prove that hyperbolic absolute risk…
We study overpricing in a repeated game between two representative agents: a market maker, who controls market liquidity, and a market taker, who chooses trade quantities. Market prices evolve through the endogenous price impact of trades…
In the ever evolving landscape of decentralized finance automated market makers (AMMs) play a key role: they provide a market place for trading assets in a decentralized manner. For so-called bluechip pairs, arbitrage activity provides a…
We design a simple ascending-price algorithm to compute a $(1+\varepsilon)$-approximate equilibrium in Arrow-Debreu exchange markets with weak gross substitute (WGS) property, which runs in time polynomial in market parameters and $\log…
We consider a market where a finite number of players trade an asset whose supply is a stochastic process. The price formation problem consists of finding a price process that ensures that when agents act optimally to minimize their trading…
Hanson's market scoring rules allow us to design a prediction market that still gives useful information even if we have an illiquid market with a limited number of budget-constrained agents. Each agent can "move" the current price of a…
Concentrated liquidity automated market makers (AMMs), such as Uniswap v3, enable liquidity providers (LPs) to earn liquidity rewards by depositing tokens into liquidity pools. However, LPs often face significant financial losses driven by…
The Artificial Prediction Market is a recent machine learning technique for multi-class classification, inspired from the financial markets. It involves a number of trained market participants that bet on the possible outcomes and are…
The Fisher market is one of the most fundamental models for resource allocation problems in economic theory, wherein agents spend a budget of currency to buy goods that maximize their utilities, while producers sell capacity constrained…
Market makers play an important role in providing liquidity to markets by continuously quoting prices at which they are willing to buy and sell, and managing inventory risk. In this paper, we build a multi-agent simulation of a dealer…
We develop an axiomatic theory for Automated Market Makers (AMMs) in local energy sharing markets and analyze the Markov Perfect Equilibrium of the resulting economy with a Mean-Field Game. In this game, heterogeneous prosumers solve a…
This paper initiates a study into the century-old issue of market predictability from the perspective of computational complexity. We develop a simple agent-based model for a stock market where the agents are traders equipped with simple…
An automated market maker (AMM) is a state machine that manages pools of assets, allowing parties to buy and sell those assets according to a fixed mathematical formula. AMMs are typically implemented as smart contracts on blockchains, and…
We consider the social welfare that can be facilitated by a constant function market maker (CFMM). When there is sufficient liquidity available to the CFMM, it can approximate the optimal social welfare when all users transactions are…
The stock market presents a challenging environment for accurately predicting future stock prices due to its intricate and ever-changing nature. However, the utilization of advanced methodologies can significantly enhance the precision of…
Liquidity and trading activity on constant function market makers (CFMMs) such as Uniswap, Curve, and Balancer has grown significantly in the second half of 2020. Much of the growth of these protocols has been driven by incentivized pools…
Financial models do not merely analyse markets, but actively shape them. This effect, known as performativity, describes how financial theories and the subsequent actions based on them influence market processes, by creating self-fulfilling…
We develop a new market-making model, from the ground up, which is tailored towards high-frequency trading under a limit order book (LOB), based on the well-known classification of order types in market microstructure. Our flexible…