Related papers: Pricing and hedging of decentralised lending contr…
P2P lending presents as an innovative and flexible alternative for conventional lending institutions like banks, where lenders and borrowers directly make transactions and benefit each other without complicated verifications. However, due…
We model incentive security in non-custodial stablecoins and derive conditions for participation in a stablecoin system across risk absorbers (vaults/CDPs) and holders of governance tokens. We apply option pricing theory to derive closed…
Uniswap v3 is the largest decentralized exchange for digital currencies. A novelty of its design is that it allows a liquidity provider (LP) to allocate liquidity to one or more closed intervals of the price of an asset instead of the full…
While online interactions and exchanges have grown exponentially over the past decade, most commercial infrastructures still operate through centralized protocols, and their success essentially depends on trust between different economic…
We study the problem of online learning in competitive settings in the context of two-sided matching markets. In particular, one side of the market, the agents, must learn about their preferences over the other side, the firms, through…
Decentralized exchanges (DEXes) have introduced an innovative trading mechanism, where it is not necessary to match buy-orders and sell-orders to execute a trade. DEXes execute each trade individually, and the exchange rate is automatically…
We study the problem of decision-making in the setting of a scarcity of shared resources when the preferences of agents are unknown a priori and must be learned from data. Taking the two-sided matching market as a running example, we focus…
Distributed Ledger Technology (DLT) has an enormous potential but also downsides. One downside of many DLT systems, such as blockchain, is their limited transaction throughput that hinders their adoption in many use cases (e.g., real-time…
This paper proposes a two-stage scoring approach to help lenders decide their fund allocations in the peer-to-peer (P2P) lending market. The existing scoring approaches focus on only either probability of default (PD) prediction, known as…
Sequential fundraising in two sided online platforms enable peer to peer lending by sequentially bringing potential contributors, each of whose decisions impact other contributors in the market. However, understanding the dynamics of…
In the Internet of Things (IoT) domain, devices need a platform to transact seamlessly without a trusted intermediary. Although Distributed Ledger Technologies (DLTs) could provide such a platform, blockchains, such as Bitcoin, were not…
In this paper, we construct a decentralized clearing mechanism which endogenously and automatically provides a claims resolution procedure. This mechanism can be used to clear a network of obligations through blockchain. In particular, we…
This paper shows how reinforcement learning can be used to derive optimal hedging strategies for derivatives when there are transaction costs. The paper illustrates the approach by showing the difference between using delta hedging and…
Deep hedging (Buehler et al. 2019) is a versatile framework to compute the optimal hedging strategy of derivatives in incomplete markets. However, this optimal strategy is hard to train due to action dependence, that is, the appropriate…
Dynamic hedging is the practice of periodically transacting financial instruments to offset the risk caused by an investment or a liability. Dynamic hedging optimization can be framed as a sequential decision problem; thus, Reinforcement…
Most deep learning frameworks require users to pool their local data or model updates to a trusted server to train or maintain a global model. The assumption of a trusted server who has access to user information is ill-suited in many…
Link prediction (LP) algorithms propose to each node a ranked list of nodes that are currently non-neighbors, as the most likely candidates for future linkage. Owing to increasing concerns about privacy, users (nodes) may prefer to keep…
Matching markets are often organized in a multi-stage and decentralized manner. Moreover, participants in real-world matching markets often have uncertain preferences. This article develops a framework for learning optimal strategies in…
Decentralised Finance (DeFi) applications constitute an entire financial ecosystem deployed on blockchains. Such applications are based on complex protocols and incentive mechanisms whose financial safety is hard to determine. Besides,…
Dealers make money by providing liquidity to clients but face flow uncertainty and thus price risk. They can efficiently skew their prices and wait for clients to mitigate risk (internalization), or trade with other dealers in the open…