Related papers: Decentralised Finance and Automated Market Making:…
Automated market makers with concentrated liquidity capabilities are programmable at the tick level. The maximization of earned fees, plus depreciated reserves, is a convex optimization problem whose vector solution gives the best provision…
We consider an exchange who wishes to set suitable make-take fees to attract liquidity on its platform. Using a principal-agent approach, we are able to describe in quasi-explicit form the optimal contract to propose to a market maker. This…
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…
This paper studies the question whether automated market maker protocols such as Uniswap can sustainably retain a portion of their trading fees for the protocol. We approach the problem by modelling how to optimally choose a pool's take…
Liquidation of collateral are the primary safeguard for solvency of lending protocols in decentralized finance. However, the mechanics of liquidations expose these protocols to predatory price manipulations and other forms of Maximal…
Following the recent literature on make take fees policies, we consider an exchange wishing to set a suitable contract with several market makers in order to improve trading quality on its platform. To do so, we use a principal-agent…
The reproduction of realistic dynamics in financial markets is of great significance, as it enhances our understanding of market evolution beyond other physical processes, and facilitates the development and backtesting of investment…
In this paper, we analyze traders' behavior within both centralized exchanges (CEXs) and decentralized exchanges (DEXs), focusing on the volatility of Bitcoin prices and the trading activity of investors engaged in perpetual future…
This paper initiates a study into the century-old issue of market predictability from the perspective of computational complexity. We develop a simple agent-based model for a stock market where the agents are traders equipped with simple…
The Efficient Market Hypothesis has been a staple of economics research for decades. In particular, weak-form market efficiency -- the notion that past prices cannot predict future performance -- is strongly supported by econometric…
The goal of this work is to study binary market models with transaction costs, and to characterize their arbitrage opportunities. It has been already shown that the absence of arbitrage is related to the existence of \lambda-consistent…
Demand-side management (DSM) programs introduce complex pricing, requiring advanced control for cost minimization. Model Predictive Control (MPC) offers a solution but its performance hinges on appropriate hyperparameter tuning. We propose…
As markets have digitized, the number of tradable products has skyrocketed. Algorithmically constructed portfolios of these assets now dominate public and private markets, resulting in a combinatorial explosion of tradable assets. In this…
We study overpricing in a repeated game between two representative agents: a market maker, who controls market liquidity, and a market taker, who chooses trade quantities. Market prices evolve through the endogenous price impact of trades…
Decentralized Finance (DeFi) money markets have seen explosive growth in recent years, with billions of dollars borrowed in various cryptocurrency assets. Key to the safety of money markets is the implementation of interest rates that…
This paper presents a new artificial market simulation platform, PAMS: Platform for Artificial Market Simulations. PAMS is developed as a Python-based simulator that is easily integrated with deep learning and enabling various simulation…
Everlasting options, a relatively new class of perpetual financial derivatives, have emerged to tackle the challenges of rolling contracts and liquidity fragmentation in decentralized finance markets. This paper offers an in-depth analysis…
Building on ideas from online convex optimization, we propose a general framework for the design of efficient securities markets over very large outcome spaces. The challenge here is computational. In a complete market, in which one…
Decentralized Exchanges are becoming even more predominant in today's finance. Driven by the need to study this phenomenon from an academic perspective, the SIAG/FME Code Quest 2023 was announced. Specifically, participating teams were…
A market with asymmetric information can be viewed as a repeated exchange game between the informed sector and the uninformed one. In a market with risk-neutral agents, De Meyer [2010] proves that the price process should be a particular…