Related papers: Replicating Monotonic Payoffs Without Oracles
We present a method for constructing Constant Function Market Makers (CFMMs) whose portfolio value functions match a desired payoff. More specifically, we show that the space of concave, nonnegative, nondecreasing, 1-homogeneous payoff…
The current design space of derivatives in Decentralized Finance (DeFi) relies heavily on oracle systems. Replicating market makers (RMMs) provide a mechanism for converting specific payoff functions to an associated Constant Function…
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…
With the emergence of decentralized finance, new trading mechanisms called Automated Market Makers have appeared. The most popular Automated Market Makers are Constant Function Market Makers. They have been studied both theoretically and…
This paper develops a model-free framework for static fixed-income pricing and the replication of liability cash flows. We show that the absence of static arbitrage across a universe of fixed-income instruments is equivalent to the…
This article analytically characterizes the impermanent loss for automatic market makers in decentralized exchanges such as Uniswap or Balancer (CPMM). We present a theoretical static replication formula for the pool value using a…
Constant function market makers(CFMMS) are a popular market design for decentralized exchanges(DEX). Liquidity providers(LPs) supply the CFMMs with assets to enable trades. In exchange for providing this liquidity, an LP receives a token…
Automated Market Makers (AMMs) are a central component of decentralized exchanges, yet their equilibrium foundations and microeconomic mechanisms remain incompletely understood. This paper develops a dynamic equilibrium framework for…
This paper mathematically models a constant-function automated market maker (CFAMM) position as a portfolio of exotic options, known as perpetual American continuous-installment (CI) options. This model replicates an AMM position's delta at…
Constant function market makers (CFMMs) are the most popular type of decentralized trading venue for cryptocurrency tokens. In this paper, we give a very general geometric framework (or 'axioms') which encompass and generalize many of the…
This work analytically characterizes impermanent loss for automated market makers (AMMs) in decentralized markets such as Uniswap or Balancer (CPMM). We derive a static replication formula for the pool's value using a combination of…
Automated market makers, first popularized by Hanson's logarithmic market scoring rule (or LMSR) for prediction markets, have become important building blocks, called 'primitives,' for decentralized finance. A particularly useful primitive…
This paper develops a robust mathematical framework for Constant Function Market Makers (CFMMs) by transitioning from traditional token reserve analyses to a coordinate system defined by price and intrinsic liquidity. We establish a…
This paper introduces and analyzes \emph{defensive rebalancing}, a novel mechanism for protecting constant-function market makers (CFMMs) from value leakage due to arbitrage. A \emph{rebalancing} transfers assets directly from one CFMM's…
In this paper we propose a new robust algorithm to find the optimal static replicating portfolios for general nonlinear payoff functions and give the estimate of the rate of convergence that is absent in the literature. We choose the static…
Constant-function market makers (CFMMs), such as Uniswap, are automated exchanges offering trades among a set of assets. We study their technical relationship to another class of automated market makers, cost-function prediction markets. We…
Constant Function Market Makers (CFMMs) are a family of automated market makers that enable censorship-resistant decentralized exchange on public blockchains. Arbitrage trades have been shown to align the prices reported by CFMMs with those…
We investigate the most common type of blockchain-based decentralized exchange, which are known as constant function market makers (CFMMs). We examine the the market microstructure around CFMMs and present a model for valuing the liquidity…
Automated market makers (AMMs) are a new type of trading venues which are revolutionising the way market participants interact. At present, the majority of AMMs are constant function market makers (CFMMs) where a deterministic trading…
Constant function market makers (CFMMs) such as Uniswap have facilitated trillions of dollars of digital asset trades and have billions of dollars of liquidity. One natural question is how to optimally route trades across a network of CFMMs…