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Automated market makers (AMMs) are a new type of trading venues which are revolutionising the way market participants interact. At present, the majority of AMMs are constant function market makers (CFMMs) where a deterministic trading…
In this work, we present an application of the probabilistic weak formulation of mean field games (MFG) for modeling liquidity pools in a constant product automated market maker (AMM) protocol in the context of decentralized finance. Our…
We find the equilibrium contract that an automated market maker (AMM) offers to their strategic liquidity providers (LPs) in order to maximize the order flow that gets processed by the venue. Our model is formulated as a leader-follower…
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 decentralized finance, any individual can pool their assets into an automated market maker (AMM) -- herein we focus on the constant product market maker (CPMM) -- in exchange for a claim on a fraction of future pool assets and fees…
Automated market makers (AMMs) allocate fee revenue \textit{proportional} to the amount of liquidity investors deposit. In this paper, we study the economic consequences of the competition between passive liquidity providers (LPs) caused by…
To trade tokens in cryptoeconomic systems, automated market makers (AMMs) typically rely on liquidity providers (LPs) that deposit tokens in exchange for rewards. To profit from such rewards, LPs must use effective liquidity provisioning…
Liquidity providers (LPs) are essential figures in the operation of automated market makers (AMMs); in exchange for transaction fees, LPs lend the liquidity that allows AMMs to operate. While many prior works have studied the incentive…
Concentrated liquidity automated market makers (AMMs), such as Uniswap v3, enable liquidity providers (LPs) to earn liquidity rewards by depositing tokens into liquidity pools. However, LPs often face significant financial losses driven by…
Concentrated Liquidity Market Makers (CLMMs) represent a fundamental innovation in market microstructure, transforming liquidity provision from passive portfolio allocation to active risk management. This evolution creates significant…
The emergence of Concentrated Liquidity Market Makers (CLMMs) has made liquidity provision on decentralized exchanges an active and risk-sensitive task. However, the standalone profitability of liquidity provision remains unclear for…
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…
Market fragmentation across multiple Automated Market Makers (AMMs) creates inefficiencies such as costly arbitrage, unnecessarily high slippage and delayed incorporation of new information into prices. These inefficiencies raise trading…
In decentralized finance ("DeFi"), automated market makers (AMMs) enable traders to programmatically exchange one asset for another. Such trades are enabled by the assets deposited by liquidity providers (LPs). The goal of this paper is to…
Passive liquidity providers (LPs) in automated market makers (AMMs) face losses due to adverse selection (LVR), which static trading fees often fail to offset in practice. We study the key determinants of LP profitability in a dynamic…
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…
Constant product markets with concentrated liquidity (CL) are the most popular type of automated market makers. In this paper, we characterise the continuous-time wealth dynamics of strategic LPs who dynamically adjust their range of…
An automated market maker (AMM) provides a method for creating a decentralized exchange on the blockchain. For this purpose, individual investors lend liquidity to the AMM pool in exchange for a stream of fees earned from its operations as…
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…
Prediction markets allow traders to bet on potential future outcomes. These markets exist for weather, political, sports, and economic forecasting. Within this work we consider a decentralized framework for prediction markets using…