Related papers: A theoretical framework for fees in AMMs
Along with the energy transition, the energy markets change their organization toward more decentralized and self-organized structures, striving for locally optimal profits. These tendencies may endanger the physical grid stability. One…
Automated Market Makers (AMMs) are used to provide liquidity for combinatorial prediction markets that would otherwise be too thinly traded. They offer both buy and sell prices for any of the doubly exponential many possible securities that…
This paper studies liquid staking tokens (LSTs) on automated market makers (AMMs), both theoretically and empirically. LSTs are tokenized representations of staked assets on proof-of-stake blockchains. First, we model LST-liquidity on AMMs…
We study the optimal mechanism design problem faced by a market intermediary who makes revenue by connecting buyers and sellers. We first show that the optimal intermediation protocol has substantial structure: it is the solution to an…
We investigate whether the fee income from trades on the CFM is sufficient for the liquidity providers to hedge away the exposure to market risk. We first analyse this problem through the lens of continuous-time financial mathematics and…
In a semi-realistic market simulator, independent reinforcement learning algorithms may facilitate market makers to maintain wide spreads even without communication. This unexpected outcome challenges the current antitrust law framework. We…
This paper studies optimal market making for large-tick assets in the presence of latency. We consider a random walk model for the asset price, and formulate the market maker's optimization problem using Markov Decision Processes (MDP). We…
This article analytically characterizes the impermanent loss for automatic market makers in decentralized exchanges such as Uniswap or Balancer (CPMM). We present a theoretical static replication formula for the pool value using a…
This paper examines the role of algorithmic trading in modern financial markets. Additionally, order types, characteristics, and special features of algorithmic trading are described under the lens provided by the large development of high…
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,…
Batch auctions are a classical market microstructure, acclaimed for their fairness properties, and have received renewed interest in the context of blockchain-based financial systems. Constant function market makers (CFMMs) are another…
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…
AMMs are autonomous smart contracts deployed on a blockchain that make markets between different assets that live on that chain. In this paper we are examining a specific class of AMMs called Constant Function Market Makers whose trading…
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…
This position paper argues that agentic AI systems should be designed and evaluated as \emph{marginal token allocation economies} rather than as text generators priced by the unit. We follow a single request -- a developer asking a coding…
The global ambitions of a carbon-neutral society necessitate a stable and robust smart grid that capitalises on frequency reserves of renewable energy. Frequency reserves are resources that adjust power production or consumption in real…
In a universal framework that expresses any market system in terms of state transition rules, we prove that every DeFi market system has an invariant function and is thus by definition a CFMM; indeed, all automated market makers (AMMs) are…
We envision a marketplace where diverse entities offer specialized "modules" through APIs, allowing users to compose the outputs of these modules for complex tasks within a given budget. This paper studies the market design problem in such…
Designing automated market makers (AMMs) for prediction markets on combinatorial securities over large outcome spaces poses significant computational challenges. Prior research has primarily focused on combinatorial prediction markets…
We study the most famous example of a large financial market: the Arbitrage Pricing Model, where investors can trade in a one-period setting with countably many assets admitting a factor structure. We consider the problem of maximising…