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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…
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…
Financial options are fundamental to traditional markets, enabling strategies ranging from hedging to speculating. Yet, while the Automated Market Maker paradigm has revolutionized decentralized spot markets, no equivalent standard has…
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…
In decentralized finance, any individual can pool their assets into an automated market maker (AMM) -- herein we focus on the constant product market maker (CPMM) -- in exchange for a claim on a fraction of future pool assets and fees…
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…
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 (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…
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…
Decentralised automated market makers (AMMs) have gained significant attention recently. We propose an adaptive and automated Dynamic Function Market Maker (DFMM) that addresses challenges in this space. Our DFMM protocol includes a data…
Automated Market Makers (AMMs) have cemented themselves as an integral part of the decentralized finance (DeFi) space. AMMs are a type of exchange that allows users to trade assets without the need for a centralized exchange. They form the…
We study decentralized markets for goods whose utility perishes in time, with compute as a primary motivation. Recent advances in reproducible and verifiable execution allow jobs to pause, verify, and resume across heterogeneous hardware,…
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…
Decentralized Finance (DeFi) applications introduce novel financial instruments replicating and extending traditional ones through blockchain-based smart contracts. Among these applications, DeFi derivatives protocols enable the creation…
Automated Market Makers (AMMs) are decentralized applications that allow users to exchange crypto-tokens without the need for a matching exchange order. AMMs are one of the most successful DeFi use cases: indeed, major AMM platforms process…
This paper sets forth a framework for deep reinforcement learning as applied to market making (DRLMM) for cryptocurrencies. Two advanced policy gradient-based algorithms were selected as agents to interact with an environment that…
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 prediction markets (DePMs) allow open participation in event-based wagering without fully relying on centralized intermediaries. We review the history of DePMs which date back to 2011 and includes hundreds of proposals.…
Automated market makers (AMMs) are one of the most prominent decentralized finance (DeFi) applications. AMMs allow users to trade different types of crypto-tokens, without the need to find a counter-party. There are several implementations…
In this paper, we introduce a numeraire-free and original probability based framework for financial markets. We reformulate or characterize fair markets, the optional decomposition theorem, superhedging, attainable claims and complete…