Related papers: Efficient Liquidity Providing via Margin Liquidity
Financial markets are undergoing an unprecedented transformation. Technological advances have brought major improvements to the operations of financial services. While these advances promote improved accessibility and convenience,…
Layer-2 (L2) blockchains inherit Ethereums security guarantees while reducing gas fees. As a result, they are gaining traction among traders at Automated Market Makers (AMMs), sparking debate over whether they contribute to liquidity…
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…
Decentralized cryptocurrency exchanges offer compelling security benefits over centralized exchanges: users control their funds and avoid the risk of an exchange hack or malicious operator. However, because user assets are fully accessible…
Options are fundamental to blockchain-based financial services, offering essential tools for risk management and price speculation, which enhance liquidity, flexibility, and market efficiency in decentralized finance (DeFi). Despite the…
Dynamic pricing is commonly used to regulate congestion in shared service systems. This paper is motivated by the fact that in the presence of users with varying price sensitivity (responsiveness), conventional monotonic pricing can lead to…
The trustless nature of permissionless blockchains renders overcollateralization a key safety component relied upon by decentralized finance (DeFi) protocols. Nonetheless, factors such as price volatility may undermine this mechanism. In…
The efficiency of decentralized book systems like Bitcoin and Ethereum has always been a challenge. It is usually measured by three major factors: scalability, throughput, and latency. Scalability refers to how the system capacity is…
In recent years, there is an emerging trend that some computing services are moving from cloud to the edge of the networks. Compared to cloud computing, edge computing can provide services with faster response, lower expense, and more…
Financial speculators often seek to increase their potential gains with leverage. Debt is a popular form of leverage, and with over 39.88B USD of total value locked (TVL), the Decentralized Finance (DeFi) lending markets are thriving.…
Evolutions of the trading landscape lead to the capability to exchange the same financial instrument on different venues. Because of liquidity issues, the trading firms split large orders across several trading destinations to optimize…
This study provides a practical introduction to high-frequency trading in blockchain-based currency markets. These types of markets have some specific characteristics that differentiate them from the stock markets, such as a large number of…
We consider Uniswap-like automated market makers, and, specifically, constant product liquidity pools, operating on blockchains. An important feature of Uniswap is the ability for a trader to carry out a sequence of asset swaps atomically,…
Since they were authorized by the U.S. Security and Exchange Commission in 1998, electronic exchanges have boomed, and by 2010 high frequency trading accounted for over 70% of equity trades in the US. Such markets are thought to increase…
Decentralized Exchanges (DEXs) are now a significant component of the financial world where billions of dollars are traded daily. Differently from traditional markets, which are typically based on Limit Order Books, DEXs typically work as…
A small investor provides liquidity at the best bid and ask prices of a limit order market. For small spreads and frequent orders of other market participants, we explicitly determine the investor's optimal policy and welfare. In doing so,…
Decentralized perpetuals protocols have collectively reached billions of dollars of daily trading volume, yet are still not serious competitors on the basis of trading volume with centralized venues such as Binance. One of the main reasons…
Elastic Cash is a new decentralized mechanism for regulating the money supply. The mechanism operates by modifying the supply so that an interest rate determined by a public market is kept approximately fixed. It can be incorporated into…
This paper studies four trading algorithms of a professional trader at a multilateral trading facility, observing a realistic two-sided limit order book whose dynamics are driven by the order book events. The identity of the trader can be…
We examine how the introduction of concentrated liquidity has changed the liquidity provision market in automated market makers such as Uniswap. To this end, we compare average liquidity provider returns from trading fees before and after…