Related papers: Triangle Fees
Shadow prices simplify the derivation of optimal trading strategies in markets with transaction costs by transferring optimization into a more tractable, frictionless market. This paper establishes that a na\"ive shadow price Ansatz for…
Modern blockchains increasingly rely on parallel execution to improve throughput. We show several industry and academic transaction fee mechanisms (TFMs) struggle to simultaneously account for execution parallelism while remaining…
This paper develops a rigorous mathematical framework for analyzing Concentrated Liquidity Market Makers (CLMMs) in Decentralized Finance (DeFi) within a continuous-time setting. We model the evolution of liquidity profiles as…
Value adjustment of uncollateralized trades is determined within a risk-neutral pricing framework. When hedging such trades, investors cannot freely trade protection on their own name, thus facing an incomplete market. This fact is…
An investor with constant relative risk aversion trades a safe and several risky assets with constant investment opportunities. For a small fixed transaction cost, levied on each trade regardless of its size, we explicitly determine the…
We compare the profit of the optimal third-degree price discrimination policy against a uniform pricing policy. A uniform pricing policy offers the same price to all segments of the market. Our main result establishes that for a broad class…
Blockchains have popularized automated market makers (AMMs). An AMM exchange is an application running on a blockchain which maintains a pool of crypto-assets and automatically trades assets with users governed by some pricing function that…
American options are studied in a general discrete market in the presence of proportional transaction costs, modelled as bid-ask spreads. Pricing algorithms and constructions of hedging strategies, stopping times and martingale…
What are the prices of random variables? In this paper, we define the least-squares prices of coin-flipping games, which are proved to be minimal, positive linear, and arbitrage-free. These prices depend both on a set of games that are…
This article is the second one in a series on the use of scaling invariance in finance. In the first article (cond-mat/9906048), we introduced a new formalism for the pricing of derivative securities, which focusses on tradable objects…
The pricing and hedging of a general class of options (including American, Bermudan and European options) on multiple assets are studied in the context of currency markets where trading is subject to proportional transaction costs, and…
We introduce a new framework for optimal routing and arbitrage in AMM driven markets. This framework improves on the original best-practice convex optimization by restricting the search to the boundary of the optimal space. We can…
In this article, we introduce a new type of mapping contracting perimeters of triangles in a complete metric space and present related fixed point theorem. We study the metric completeness property of the underlying space in terms of fixed…
We consider a trading marketplace that is populated by traders with diverse trading strategies and objectives. The marketplace allows the suppliers to list their goods and facilitates matching between buyers and sellers. In return, such a…
An edge switch is an operation which makes a local change in a graph while maintaining the degree of every vertex. We introduce a switch move, called a triangle switch, which creates or deletes at least one triangle. Specifically, a make…
This paper analizes the optimal level of transfer pricing manipulation when the expected tax penalty is a function of the tax enforcement and the market price parameter. The arm's length principle implies the existence of a range of…
In a market with one safe and one risky asset, an investor with a long horizon, constant investment opportunities, and constant relative risk aversion trades with small proportional transaction costs. We derive explicit formulas for the…
We consider a market where a finite number of players trade an asset whose supply is a stochastic process. The price formation problem consists of finding a price process that ensures that when agents act optimally to minimize their trading…
Automated market makers (AMM) have grown to obtain significant market share within the cryptocurrency ecosystem, resulting in a proliferation of new products pursuing exotic strategies for horizontal differentiation. Yet, their theoretical…
The alignment tax is widely discussed but has not been formally characterized. We provide a geometric theory of the alignment tax in representation space. Under linear representation assumptions, we define the alignment tax rate as the…