Related papers: A Dynamic Equilibrium Model for Automated Market M…
We study the trading activity of designated market makers (DMMs) in electronic markets using a unique dataset with audit-trail information on trader classification. DMMs may either adhere to their market-making agreements and offer…
Agent-based models provide a constructive approach to studying emergent dynamics in life-like systems composed of interacting, adaptive agents. Financial markets serve as a canonical example of such systems, where collective price dynamics…
In this paper, we consider dynamic multi-agent systems (MAS) for decentralized resource allocation. The MAS operates at a competitive equilibrium to ensure supply and demand are balanced. First, we investigate the MAS over a finite horizon.…
We present a method for constructing Constant Function Market Makers (CFMMs) whose portfolio value functions match a desired payoff. More specifically, we show that the space of concave, nonnegative, nondecreasing, 1-homogeneous payoff…
Convex optimisation has provided a mechanism to determine arbitrage trades on automated market markets (AMMs) since almost their inception. Here we outline generic closed-form solutions for $N$-token geometric mean market maker pool…
We study a dynamic asset pricing problem in which a representative agent is ambiguous about the aggregate endowment growth rate and trades a risky stock, human capital, and a risk-free asset to maximize her preference value of consumption…
We initiate the study of statistical inference and A/B testing for two market equilibrium models: linear Fisher market (LFM) equilibrium and first-price pacing equilibrium (FPPE). LFM arises from fair resource allocation systems such as…
In this paper we analyze constant product market makers (CPMMs). We formalize the liquidity providers' profitability conditions and introduce a concept we call the profitability frontier in the xyk-space. We study the effect of mint and…
This paper extends the theoretical framework introduced in Liquidity Pools as Mean Field Games: A New Framework, where the interactions among traders in a constant product market-making protocol were modeled using mean field games (MFG). In…
AMMs are autonomous smart contracts deployed on a blockchain that make markets between different assets that live on that chain. In this paper we are examining a specific class of AMMs called Constant Function Market Makers whose trading…
In this paper, we introduce a suite of models for price-aware automated market making platforms willing to optimize their quotes. These models incorporate advanced price dynamics, including stochastic volatility, jumps, and microstructural…
We model an informed agent with information about the future value of an asset trying to maximize profits when subjected to a transaction cost as well as a market maker tasked with setting fair transaction prices. In a single auction model,…
AI agents are increasingly used in consumer-facing applications to assist with tasks such as product search, negotiation, and transaction execution. In this paper, we explore a future scenario where both consumers and merchants authorize AI…
Everlasting options, a relatively new class of perpetual financial derivatives, have emerged to tackle the challenges of rolling contracts and liquidity fragmentation in decentralized finance markets. This paper offers an in-depth analysis…
Liquidation of collateral are the primary safeguard for solvency of lending protocols in decentralized finance. However, the mechanics of liquidations expose these protocols to predatory price manipulations and other forms of Maximal…
Autonomous and learning agents increasingly participate in markets - setting prices, placing bids, ordering inventory. Such agents are not just aiming to optimize in an uncertain environment; they are making decisions in a game-theoretical…
Recently, several new pari-mutuel mechanisms have been introduced to organize markets for contingent claims. Hanson introduced a market maker derived from the logarithmic scoring rule, and later Chen and Pennock developed a cost function…
In this paper, we show that any monotonic payoff can be replicated using only liquidity provider shares in constant function market makers (CFMMs), without the need for additional collateral or oracles. Such payoffs include cash-or-nothing…
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…
We study a new "laminated" queueing model for orders on batched trading venues such as decentralised exchanges. The model aims to capture and generalise transaction queueing infrastructure that has arisen to organise MEV activity on public…