Related papers: A theoretical framework for fees in AMMs
We demonstrate the application of an algorithmic trading strategy based upon the recently developed dynamic mode decomposition (DMD) on portfolios of financial data. The method is capable of characterizing complex dynamical systems, in this…
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…
Cyclic arbitrage chances exist abundantly among decentralized exchanges (DEXs), like Uniswap V2. For an arbitrage cycle (loop), researchers or practitioners usually choose a specific token, such as Ether as input, and optimize their input…
In this paper, we study an investor's optimal entry and exit decisions in a liquid staking protocol (LSP) and an automated market maker (AMM), primarily from the standpoint of the investor. Our analysis focuses on two key investor actions:…
We present an automated market-making (AMM) cross-settlement mechanism for digital assets on interoperable blockchains, focusing on central bank digital currencies (CBDCs) and stable coins. We develop an innovative approach for generating…
This paper studies an equity market of stochastic dimension, where the number of assets fluctuates over time. In such a market, we develop the fundamental theorem of asset pricing, which provides the equivalence of the following statements:…
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…
The programmable and composable nature of smart contract protocols has enabled the emergence of novel market structures and asset classes that are architecturally frictional to implement in traditional financial paradigms. This fluidity has…
This paper investigates the optimal hedging strategies of an informed broker interacting with multiple traders in a financial market. We develop a theoretical framework in which the broker, possessing exclusive information about the drift…
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…
Automated Market Maker (AMM)-based Decentralized Exchanges (DEXs) are crucial in Decentralized Finance (DeFi), but Ethereum implementations suffer from high transaction costs and price synchronization challenges. To address these…
We consider the multi-period portfolio optimization problem with a single asset that can be held long or short. Due to the presence of transaction costs, maximizing the immediate reward at each period may prove detrimental, as frequent…
This paper demonstrates that Automated Market Maker (AMM) based markets, such as those using constant product formulas (e.g., Uniswap), are inherently path-dependent. We prove mathematically that the sequence of operations in AMMs…
We consider an infinite dimensional optimization problem motivated by mathematical economics. Within the celebrated "Arbitrage Pricing Model", we use probabilistic and functional analytic techniques to show the existence of optimal…
Volume imbalance in a limit order book is often considered as a reliable indicator for predicting future price moves. In this work, we seek to analyse the nuances of the relationship between prices and volume imbalance. To this end, we…
We present a formal framework for the aggregation of financial markets mediated by arbitrage. Our main tool is to characterize markets via utility functions and to employ a one-to-one correspondence to limit order book states. Inspired by…
The purpose of Inventory Pricing is to bid the right prices to online ad opportunities, which is crucial for a Demand-Side Platform (DSP) to win advertising auctions in Real-Time Bidding (RTB). In the planning stage, advertisers need the…
The primary contribution of this paper resides in devising constant-factor approximation guarantees for revenue maximization in two-sided matching markets, under general pairwise rewards. A major distinction between our work and…
We consider the dynamics and the interactions of multiple reinforcement learning optimal execution trading agents interacting with a reactive Agent-Based Model (ABM) of a financial market in event time. The model represents a market ecology…
Interaction strategies for reward in competitive environments are significantly influenced by the nature and extent of available information. In financial markets, particularly foreign exchange (forex), traders operate independently with…