Related papers: Liquidity Provider Returns in Geometric Mean Marke…
This paper studies the question whether automated market maker protocols such as Uniswap can sustainably retain a portion of their trading fees for the protocol. We approach the problem by modelling how to optimally choose a pool's take…
This paper presents the results of a comprehensive empirical study of losses to arbitrageurs (following the formalization of loss-versus-rebalancing by [Milionis et al., 2022]) incurred by liquidity providers on automated market makers…
Automated market makers (AMMs) are smart contracts that automatically trade electronic assets according to a mathematical formula. This paper investigates how an AMM's formula affects the interests of liquidity providers, who endow the AMM…
Automated Market Makers (AMMs) hold assets and are constantly being rebalanced by external arbitrageurs to match external market prices. Loss-versus-rebalancing (LVR) is a pivotal metric for measuring how an AMM pool performs for its…
This paper aims to enhance the understanding of liquidity provider (LP) returns in automated market makers (AMMs). LPs face market risk as well as adverse selection due to risky asset holdings in the pool that they provide liquidity to and…
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…
Decentralized finance (DeFi) has revolutionized the financial landscape, with protocols like Uniswap offering innovative automated market-making mechanisms. This article explores the development of a backtesting framework specifically…
This paper studies liquid staking tokens (LSTs) on automated market makers (AMMs), both theoretically and empirically. LSTs are tokenized representations of staked assets on proof-of-stake blockchains. First, we model LST-liquidity on AMMs…
We suggest a framework to determine optimal trading fees for constant function market makers (CFMMs) in order to maximize liquidity provider returns. In a setting of multiple competing liquidity pools, we show that no race to the bottom…
The standard approach for compensating liquidity providers on many decentralized exchanges (DEX) for serving as counter-party to swaps is through charging a small percentage of fees. The expected payoff from the cash flow of this mode of…
Automated Market Makers (AMMs) are used to provide liquidity for combinatorial prediction markets that would otherwise be too thinly traded. They offer both buy and sell prices for any of the doubly exponential many possible securities that…
Uniswap v3 is the largest decentralized exchange for digital currencies. A novelty of its design is that it allows a liquidity provider (LP) to allocate liquidity to one or more closed intervals of the price of an asset instead of the full…
Decentralized Finance (DeFi) is a rapidly evolving segment of blockchain technology that enables a transformative approach to financial services through Web3 applications. By leveraging smart contracts, DeFi allows developers to build…
Decentralized exchanges (DEXs) face persistent challenges in liquidity retention and user engagement due to inefficiencies in conventional automated market maker (AMM) designs. This work proposes a dual-mechanism framework to address these…
In Decentralized Finance (DeFi), automated market makers typically implement liquidity provisioning protocols. These protocols allow third-party liquidity providers (LPs) to provide assets to facilitate trade in exchange for fees. This…
In this paper, we show that any monotonic payoff can be replicated using only liquidity provider shares in constant function market makers (CFMMs), without the need for additional collateral or oracles. Such payoffs include cash-or-nothing…
We construct liquidity-adjusted return and volatility using purposely designed liquidity metrics (liquidity jump and liquidity diffusion) that incorporate additional liquidity information. Based on these measures, we introduce a…
Automated market makers (AMMs) are a new prototype of decentralised exchanges which are revolutionising market interactions. The majority of AMMs are constant product markets (CPMs) where exchange rates are set by a trading function. This…
Designing automated market makers (AMMs) for prediction markets on combinatorial securities over large outcome spaces poses significant computational challenges. Prior research has primarily focused on combinatorial prediction markets…
The study proposes a quote-driven predictive automated market maker (AMM) platform with on-chain custody and settlement functions, alongside off-chain predictive reinforcement learning capabilities to improve liquidity provision of…