Related papers: About constant-product automated market makers
Liquidity providers are essential for the function of decentralized exchanges to ensure liquidity takers can be guaranteed a counterparty for their trades. However, liquidity providers investing in liquidity pools face many risks, the most…
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) allow parties to participate in financial markets while retaining full custody of their funds. However, the transparency of blockchain-based DEX in combination with the latency for transactions to be…
The rise of the machine learning (ML) model economy has intertwined markets for training datasets and pre-trained models. However, most pricing approaches still separate data and model transactions or rely on broker-centric pipelines that…
Automated Market Makers (AMMs) are essential in Decentralized Finance (DeFi) as they match liquidity supply with demand. They function through liquidity providers (LPs) who deposit assets into liquidity pools. However, the asset trading…
Consider a finite set of trade orders and automated market makers (AMMs) at some state. We propose a solution to the problem of finding an equilibrium price vector to execute all the orders jointly with corresponding optimal AMMs swaps. The…
This paper introduces Capability-Priced Micro-Markets (CPMM), a micro-economic framework designed to enable robust, scalable, and secure commerce among autonomous AI agents on the agentic web. The framework addresses the fundamental…
In decentralized finance (DeFi), designing fixed-income lending automated market makers (AMMs) is extremely challenging due to time-related complexities. Moreover, existing protocols only support single-maturity lending. Building upon the…
Prediction markets are powerful mechanisms for information aggregation, but existing designs are optimized for single-event contracts. In practice, traders frequently express beliefs about joint outcomes - through parlays in sports,…
With the increasing integration of power plants into the frequency-regulation markets, the importance of optimal trading has grown substantially. This paper conducts an in-depth analysis of their optimal trading behavior in sequential…
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…
Automated market makers (AMMs) are a prime example of Web 3.0 applications. Their popularity and high trading activity led to serious scalability issues in terms of throughput and state size. In this paper, we address these challenges by…
Sequential auctions for identical items with unit-demand, private-value buyers are common and often occur periodically without end, as new bidders replace departing ones. We model bidder uncertainty by introducing a probability that a…
The role of a market maker is to simultaneously offer to buy and sell quantities of goods, often a financial asset such as a share, at specified prices. An automated market maker (AMM) is a mechanism that offers to trade according to some…
Designing automated market makers (AMMs) is crucial for decentralized token exchanges in cryptoeconomic systems. At the intersection of software engineering and economics, AMM design is complex and, if done incorrectly, can lead to…
Assuming that the price in a Uniswap v3 style Automated Market Maker (AMM) follows a Geometric Brownian Motion (GBM), we prove that the strategy that adjusts the position of liquidity to track the current price leads to a deterministic and…
We present a version of the fundamental theorem of asset pricing (FTAP) for continuous time large financial markets with two filtrations in an $L^p$-setting for $ 1 \leq p < \infty$. This extends the results of Yuri Kabanov and Christophe…
We derive the stochastic price process for tokens whose sole price discovery mechanism is a constant-product automated market maker (AMM). When the net flow into the pool follows a diffusion, the token price follows a constant elasticity of…
Under proportional transaction costs, a price process is said to have a consistent price system, if there is a semimartingale with an equivalent martingale measure that evolves within the bid-ask spread. We show that a continuous,…
In a decentralized environment, exchanging resources requires users to bargain until an agreement is found. Moreover, human agreements involve a combination of collaborative and selfish behavior and often induce circularity, complicating…