Related papers: Concentrated Superelliptical Market Maker
The introduction of CCPs in most derivative transactions will dramatically change the landscape of derivatives pricing, hedging and risk management, and, according to the TABB group, will lead to an overall liquidity impact about 2 USD…
Prediction markets show considerable promise for developing flexible mechanisms for machine learning. Here, machine learning markets for multivariate systems are defined, and a utility-based framework is established for their analysis. This…
This work focuses on the mathematical study of constant function market makers. We rigorously establish the conditions for optimal trading under the assumption of a quasilinear, but not necessarily convex (or concave), trade function. This…
We present a novel agent-based approach to simulating an over-the-counter (OTC) financial market in which trades are intermediated solely by market makers and agent visibility is constrained to a network topology. Dynamics, such as changes…
Automated Market Makers (AMMs) are a central component of decentralized exchanges, yet their equilibrium foundations and microeconomic mechanisms remain incompletely understood. This paper develops a dynamic equilibrium framework for…
In this paper we study dynamic pricing mechanisms of financial derivatives. A typical model of such pricing mechanism is the so-called g--expectation defined by solutions of a backward stochastic differential equation with g as its…
We present a family of multi-asset automated market makers whose liquidity curves are derived from the financial principles of self financing transactions and rebalancing. The constant product market maker emerges as a special case.
With model uncertainty characterized by a convex, possibly non-dominated set of probability measures, the agent minimizes the cost of hedging a path dependent contingent claim with given expected success ratio, in a discrete-time,…
Wholesale electricity markets are increasingly integrated via high voltage interconnectors, and inter-regional trade in electricity is growing. To model this, we consider a spatial equilibrium model of price formation, where constraints on…
We consider the issue of a market maker acting at the same time in the lit and dark pools of an exchange. The exchange wishes to establish a suitable make-take fees policy to attract transactions on its venues. We first solve the stochastic…
We consider a market in which both suppliers and consumers compete for a product via scalar-parameterized supply offers and demand bids. Scalar-parameterized offers/bids are appealing due to their modeling simplicity and desirable…
The classical linear Black--Scholes model for pricing derivative securities is a popular model in financial industry. It relies on several restrictive assumptions such as completeness, and frictionless of the market as well as the…
Black-Scholes implied volatility is a quantile. The insight follows from the normalized option price being a probability on the variance scale, with the inverse Gaussian distribution providing the link. It enables analytically exact and…
We solve the superhedging problem for European options in an illiquid extension of the Black-Scholes model, in which transactions have transient price impact and the costs and the strategies for hedging are affected by physical or cash…
In this paper we analyse financial implications of exchangeability and similar properties of finite dimensional random vectors. We show how these properties are reflected in prices of some basket options in view of the well-known put-call…
Increased penetration of wind energy will make electricity market prices more volatile. As a result, market participants will bear increased financial risks, which impact investment decisions and in turn, makes it harder to achieve…
Automated market makers (AMMs) are pricing mechanisms utilized by decentralized exchanges (DEX). Traditional AMM approaches are constrained by pricing solely based on their own liquidity pool, without consideration of external markets or…
Liquidity Providers on Automated Market Makers generate millions of USD in transaction fees daily. However, the net value of a Liquidity Position is vulnerable to price changes in the underlying assets in the pool. The dominant measure of…
We study how to maximize the broker's (expected) profit in a two-sided market, where she buys items from a set of sellers and resells them to a set of buyers. Each seller has a single item to sell and holds a private value on her item, and…
In today's economy, selling a new zero-marginal cost product is a real challenge, as it is difficult to determine a product's "correct" sales price based on its profit and dissemination. As an example, think of the price of a new app or…