Related papers: Ergodic optimal liquidations in DeFi
This paper studies the ubiquitous problem of liquidating large quantities of highly correlated stocks, a task frequently encountered by institutional investors and proprietary trading firms. Traditional methods in this setting suffer from…
Decentralized Exchanges (DEXs) are new types of marketplaces leveraging Blockchain technology. They allow users to trade assets with Automatic Market Makers (AMM), using funds provided by liquidity providers, removing the need for order…
In Decentralized Finance (DeFi), automated market makers typically implement liquidity provisioning protocols. These protocols allow third-party liquidity providers (LPs) to provide assets to facilitate trade in exchange for fees. This…
This paper develops a rigorous mathematical framework for analyzing Concentrated Liquidity Market Makers (CLMMs) in Decentralized Finance (DeFi) within a continuous-time setting. We model the evolution of liquidity profiles as…
We study permissionless spot--perpetual basis trading in decentralized finance as a collateral control problem. The strategy holds spot inventory, hedges directional exposure with a short perpetual, and allocates capital between spot…
Decentralized finance (DeFi) borrowing and lending platforms are crucial to the decentralized economy, involving two main participants: lenders who provide assets for interest and borrowers who offer collateral exceeding their debt and pay…
Decentralized Finance (DeFi) money markets have seen explosive growth in recent years, with billions of dollars borrowed in various cryptocurrency assets. Key to the safety of money markets is the implementation of interest rates that…
We pose the decumulation strategy for a Defined Contribution (DC) pension plan as a problem in optimal stochastic control. The controls are the withdrawal amounts and the asset allocation strategy. We impose maximum and minimum constraints…
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…
We consider a decentralized system with multiple controllers and define substitutability of one controller by another in open-loop strategies. We explore the implications of this property on the optimization of closed-loop strategies. In…
Decentralized finance (DeFi) markets spread across Layer-1 (L1) and Layer-2 (L2) blockchains rely on arbitrage to keep prices aligned. Today most price gaps are closed against centralized exchanges (CEXes), whose deep liquidity and fast…
Decentralized Finance (DeFi) has revolutionized lending by replacing intermediaries with algorithm-driven liquidity pools. However, existing platforms like Aave and Compound rely on static interest rate curves and collateral requirements…
We introduce a price impact model which accounts for finite market depth, tightness and resilience. Its coupled bid- and ask-price dynamics induce convex liquidity costs. We provide existence of an optimal solution to the classical problem…
In this paper we discuss the optimal liquidation over a finite time horizon until the exit time. The drift and diffusion terms of the asset price are general functions depending on all variables including control and market regime. There is…
Decentralized finance (DeFi) in Ethereum is a financial ecosystem built on the blockchain that has locked over 200 billion USD until April 2022. All transaction information is transparent and open when transacting through the DeFi protocol,…
We solve explicitly a two-dimensional singular control problem of finite fuel type for infinite time horizon. The problem stems from the optimal liquidation of an asset position in a financial market with multiplicative and transient price…
We consider a class of optimal liquidation problems where the agent's transactions create transient price impact driven by a Volterra-type propagator along with temporary price impact. We formulate these problems as maximization of a…
We consider the bail-out optimal dividend problem under fixed transaction costs for a L\'evy risk model. Furthermore, we consider the version with a constraint expected net present value of injected capital. To characterize the solution to…
We study an optimal execution problem in illiquid markets with both instantaneous and persistent price impact and stochastic resilience when only absolutely continuous trading strategies are admissible. In our model the value function can…
We give a complete solution to the problem of minimizing the expected liquidity costs in presence of a general drift when the underlying market impact model has linear transient price impact with exponential resilience. It turns out that…