Related papers: Institutionalizing risk curation in decentralized …
This paper presents a new model for pricing financial derivatives subject to collateralization. It allows for collateral arrangements adhering to bankruptcy laws. As such, the model can back out the market price of a collateralized…
The role of collateral in derivative pricing has evolved beyond credit risk mitigation, particularly following the global financial crisis, when funding costs and basis spreads became central to valuation practices. This development…
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 present the first formal treatment of \emph{yield tokenization}, a mechanism that decomposes yield-bearing assets into principal and yield components to facilitate risk transfer and price discovery in decentralized finance (DeFi). We…
Recently emerging Decentralized Finance (DeFi) takes the promise of cryptocurrencies a step further, leveraging their decentralized networks to transform traditional financial products into trustless and transparent protocols that run…
Effective risk management solutions become absolutely crucial when financial markets embrace distributed technology and decentralized financing (DeFi). This study offers a thorough survey and comparative analysis of the integration of…
How will Decentralized Finance transform financial services? Using New Institutional Economics and Dynamic Capabilities Theory, I analyse survey data from 109 experts using non-parametric methods. Experts span traditional finance, DeFi…
Decentralized Finance (DeFi) has reshaped the possibilities of reserve banking in the form of the Collateralized Debt Position (CDP). Key to the safety of CDPs is the money supply architecture that enables issued debt to maintain its value.…
In recent years, there is an emerging trend that some computing services are moving from cloud to the edge of the networks. Compared to cloud computing, edge computing can provide services with faster response, lower expense, and more…
The decentralized and trustless nature of cryptocurrencies and blockchain technology leads to a shift in the digital world. The possibility to execute small programs, called smart contracts, on cryptocurrencies like Ethereum opened doors to…
Decentralized lending protocols within the decentralized finance ecosystem enable the lending and borrowing of crypto-assets without relying on traditional intermediaries. Interest rates in these protocols are set algorithmically and…
Credit exposure in Decentralized Finance (DeFi) is often implicit and token-mediated, creating a dense web of inter-protocol dependencies. Thus, a shock to one token may result in significant and uncontrolled contagion effects. As the DeFi…
We study the economic viability of liquidity provision in decentralised exchanges (DEXs) within a structural framework in which market outcomes are endogenous. We formulate strategic interactions as a sequential game: a risk-averse…
DeFi, or Decentralized Finance, is based on a distributed ledger called blockchain technology. Using blockchain, DeFi may customize the execution of predetermined operations between parties. The DeFi system use blockchain technology to…
Fraud across the decentralized finance (DeFi) ecosystem is growing, with victims losing billions to DeFi scams every year. However, there is a disconnect between the reported value of these scams and associated legal prosecutions. We use…
We investigate the market microstructure of Automated Market Makers (AMMs), the most prominent type of blockchain-based decentralized exchanges. We show that the order execution mechanism yields token value loss for liquidity providers if…
This paper discusses a decentralized finance (DeFi) application called MakerDAO. The Maker Protocol, built on the Ethereum blockchain, enables users to create and hold currency. Current elements of the Maker Protocol are the Dai stable…
As it is known in the finance risk and macroeconomics literature, risk-sharing in large portfolios may increase the probability of creation of default clusters and of systemic risk. We review recent developments on mathematical and…
In this paper we present a novel algorithm to study the evolution of credit risk across complex multilayer networks. Pagerank-like algorithms allow for the propagation of an influence variable across single networks, and allow quantifying…
Decentralized Exchanges (DEXs) are now a significant component of the financial world where billions of dollars are traded daily. Differently from traditional markets, which are typically based on Limit Order Books, DEXs typically work as…