Related papers: A theoretical framework for fees in AMMs
Market makers provide liquidity to other market participants: they propose prices at which they stand ready to buy and sell a wide variety of assets. They face a complex optimization problem with both static and dynamic components. They…
This article explores the optimisation of trading strategies in Constant Function Market Makers (CFMMs) and centralised exchanges. We develop a model that accounts for the interaction between these two markets, estimating the conditional…
Motivated by the emergence of local groundwater exchanges, we construct and analyze stochastic models of dynamic groundwater markets. Our primary focus is endogenizing the price formation and groundwater pumping strategies in a closed…
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…
We study how trading fees and continuous-time arbitrage affect the profitability of liquidity providers (LPs) in Geometric Mean Market Makers (G3Ms). We use stochastic reflected diffusion processes to analyze the dynamics of a G3M model…
We consider derivatives written on multiple underlyings in a one-period financial market, and we are interested in the computation of model-free upper and lower bounds for their arbitrage-free prices. We work in a completely realistic…
Effective risk management solutions become absolutely crucial when financial markets embrace distributed technology and decentralized financing (DeFi). This study offers a thorough survey and comparative analysis of the integration of…
This work builds on the theoretical frameworks presented in "Liquidity pools as mean field games: A new framework" and "Liquidity pools as mean field games with transaction costs" by the same author, where the strategic interactions among…
In this paper, we derive a temporal arbitrage policy for storage via reinforcement learning. Real-time price arbitrage is an important source of revenue for storage units, but designing good strategies have proven to be difficult because of…
Motivated by the practical challenge in monitoring the performance of a large number of algorithmic trading orders, this paper provides a methodology that leads to automatic discovery of the causes that lie behind a poor trading…
In this paper, we describe a novel agent-based approach for modelling the transaction cost of buying or selling an asset in financial markets, e.g., to liquidate a large position as a result of a margin call to meet financial obligations.…
As consumer flexibility becomes expected, it is important that the market mechanisms which attain that flexibility are perceived as fair. We set out fairness issues in energy markets today, and propose a market design to address them.…
Statistical arbitrage exploits temporal price differences between similar assets. We develop a unifying conceptual framework for statistical arbitrage and a novel data driven solution. First, we construct arbitrage portfolios of similar…
An arbitrage strategy allows a financial agent to make certain profit out of nothing, i.e., out of zero initial investment. This has to be disallowed on economic basis if the market is in equilibrium state, as opportunities for riskless…
In this paper, we introduce a novel framework to model the exchange rate dynamics between two intrinsically linked cryptoassets, such as stablecoins pegged to the same fiat currency or a liquid staking token and its associated native token.…
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…
In practice there are temporary arbitrage opportunities arising from the fact that prices for a given asset at different stock exchanges are not instantaneously the same. We will show that even in such an environment there exists a…
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…
As the FX markets continue to evolve, many institutions have started offering passive access to their internal liquidity pools. Market makers act as principal and have the opportunity to fill those orders as part of their risk management,…
Some investors say increasing investors with the same strategy decreasing their profits per an investor. On the other hand, some investors using technical analysis used to use same strategy and parameters with other investors, and say that…