Automated market-making for CBDCs and stable coins on blockchain.
problem Creating fair exchange rates for digital assets on blockchain.
method Developed an innovative approach for generating fair exchange rates.
result Illustrated the approach's efficacy on G-10 currency exchange rates.
New formula identifies and quantifies costs for automated market makers.
problem Adverse selection costs faced by liquidity providers in automated market makers.
method Derives a Black-Scholes-like formula for AMMs and identifies loss-versus-rebalancing cost.
result Closed-form expressions for LVR applicable to all automated market makers.
DFMM automates market making with adaptive pricing and risk management.
problem Challenges in decentralised automated market making (AMMs).
method Data aggregator, order routing, rebalancing, arbitrageurs, protective buffers, algorithmic accounting.
result DFMM optimises inventory risk and ensures market stability.
Traditional market makers are losing their importance as automated systems have largely assumed the role of liquidity provision in markets. We update the model of Glosten and Milgrom (1985) to analyze this new world: we add multiple securities and introduce an automated market maker who uses the relationships between s…
DRL automates stock market trading with a 2.68 Sharpe Ratio.
problem Automating profitable trades in the stock market.
method Formulated as a POMDP, solved with TD3 algorithm.
result 2.68 Sharpe Ratio on unseen data.
New models optimize quotes for automated market makers considering various price dynamics and demand variability.
problem Optimizing quotes for automated market makers in volatile price environments.
method Advanced models incorporating stochastic volatility, jumps, Hawkes processes, and Markov-modulated Poisson processes.
result Optimal quotes can be computed using numerical methods tailored to each model.
This paper examines the quantitative finance aspects of AMMs in decentralized finance.
problem Understanding the mathematical and financial underpinnings of AMMs.
method Review of existing literature and analysis of mathematical aspects.
result Interesting relationship between AMMs and derivatives pricing and hedging.
QLAMMP optimizes fees on AMMs using Q-Learning.
problem Static AMMs cannot adapt to market changes, leading to high slippage.
method Developed a Q-Learning Agent (QLAMMP) to learn optimal fee rates.
result QLAMMP consistently outperforms static AMMs under various market conditions.
This study optimizes trading and arbitrage in decentralized finance's CPMs, revealing convexity costs and developing efficient strategies.
problem Optimizing trading and arbitrage in decentralized finance's constant product markets (CPMs).
method Developed models for CPMs in competing centralised exchanges, CPMs, and both venues. Derived computationally efficient strategies.
result Accurately estimated convexity costs in CPMs, which are linear in trade size and nonlinear in liquidity depth and exchange rate.
Optimal design of automated market makers for decentralized exchanges.
problem Maximizing utility for liquidity providers in decentralized exchanges.
method Modeling a risk-averse liquidity provider's optimal strategy and the optimal design of automated market makers.
result The optimal unit trading fee increases with asset volatility.
Novel AMM model for pegged cryptoassets using nested OU processes.
problem Liquidity and risk management in markets for pegged cryptoassets.
method Multi-level nested Ornstein-Uhlenbeck (OU) processes for exchange rate dynamics, calibrated and filtered AMM model.
result Consistent efficient quotes and improved liquidity provision for pegged cryptoassets.
Paper uses SAC RL to optimize market-making strategies.
problem Optimizing market-making strategies with risk management.
method Applying SAC reinforcement learning to automate market-making decisions.
result Agent learns to optimize spreads and hedge trades.
Uniform AMMs control loss in prediction markets.
problem Controlling loss in prediction markets.
method Loss-versus-rebalancing (LVR) framework and uniform AMMs.
result Uniform AMMs achieve proportional LVR to pool value.
We postulates, and then show experimentally, that liquidity deficit is the driving force of the markets. In the first part of the paper a kinematic of liquidity deficit is developed. The calculus-like approach, which is based on Radon--Nikodym derivatives and their generalization, allows us to calculate important chara…
This paper explores BTC-denominated prediction markets to avoid stablecoin opportunity costs.
problem Opportunity costs and loss of BTC exposure when converting to stablecoins.
method Analyzes three methods of liquidity provision: cross-market making, automated market making, and DeFi redirection.
result Cross-market making provides the best user risk profile but requires active liquidity.
Enhances crypto-asset AMM with deep learning for better liquidity and efficiency.
problem Reduced slippage and improved liquidity in decentralized finance.
method Deep reinforcement learning for predicting market equilibrium and optimizing liquidity.
result Improved capital efficiency and reduced slippage for crypto-asset traders.
Paper analyzes constant-product market making protocols.
problem Understanding and optimizing constant-product market making.
method Mathematical analysis of trade splitting and fee recompounding.
result Splitting trades does not affect final exchange rate.
Quantum self-attention boosts automated market maker performance in crypto trading.
problem Improving automated market maker rebalancing in crypto trading.
method Quantum Adaptive Self-Attention (QASA) using variational quantum circuits and softmax attention.
result QASA-Sequence variant achieves best single-model risk-adjusted performance in crypto trading.
This research improves capital efficiency and impermanent loss in cryptocurrency markets using multi-token trading pools.
problem Poor impermanent loss and capital efficiency in automated market makers.
method Analysis and construction of a multi-token token proactive market maker (MPMM).
result MPMM shows better impermanent loss and capital efficiency than comparable market makers.
New automated market makers for multi-asset trading.
problem Liquidity management in multi-asset trading.
method Derived from self-financing transactions and rebalancing principles.
result Constant product market maker as a special case.
This paper solves optimal market making for multiple goods, including bundling, under adverse selection.
problem Designing optimal market making mechanisms for multiple goods and adverse selection.
method Formulated as an optimal transport problem with geometric constraints, using differentiable economics.
result Optimal market making mechanisms can exploit bundling to improve prices and accept payments in kind.
Paper optimizes liquidity provision in decentralized finance markets.
problem Strategic LPs face predictable losses and concentration risk in CL pools.
method Derive optimal liquidity provision strategy based on fees, PL, and concentration risk.
result Optimal strategy increases fee revenue and profit from marginal rate changes.
This paper uses DRL to optimize liquidity in DeFi protocols, making markets more accessible.
problem Optimizing liquidity provisioning in decentralized finance protocols.
method Modeling liquidity provisioning as an MDP, training an agent with PPO to dynamically adjust positions.
result DRL-based strategy outperforms traditional heuristics in fee maximization and impermanent loss mitigation.
This research compiles knowledge on decentralized exchanges with AMM protocols.
problem Improving and developing AMM-based decentralized exchanges.
method Established a general AMM framework, compared mechanics, discussed security and privacy.
result Illustrated conservation and slippage functions of AMM protocols.
We derive a formula for liquidity providers' payoff on DEXs, linking it to volatility.
problem Liquidity providers on DEXs are undercompensated for their service.
method We derive a payoff formula for liquidity providers on DEXs, assuming geometric Brownian price movements and zero arbitrage.
result The payoff from liquidity fees is a near-linear function of volatility.
This paper addresses AMMs for expiring assets, ensuring liquidity and risk management.
problem AMMs struggle with assets that expire, leading to liquidity issues and risk exposure.
method Combines AMM and limit-order book features, ensuring liveness and dynamic price adjustment.
result A DEX for expiring assets maintains liquidity and risk management.
Paper proposes efficient cost functions for automated market makers in DeFi.
problem Inefficient and computationally complex cost functions in DeFi.
method Proposes and analyzes constant circle/ellipse based cost functions.
result Proposed cost functions are computationally efficient and robust against attacks.
We introduce a modular framework for market making. It combines cost-function based automated market makers with bandit algorithms. We obtain worst-case profits guarantee's relative to the best in hindsight within a class of natural "overround" cost functions . This combination allow us to have distribution-free guaran…
This thesis studies CPMMs with CL, developing strategies for LTs and LPs.
problem Trading mechanisms and strategies for CPMMs with CL.
method Formalizes CPMMs with CL, develops strategies using market data and models.
result Derives optimal strategies for LTs and LPs in CPMMs with CL.
Paper proposes a new reinforcement learning framework for cryptocurrency market making.
problem Improving profit and stability in cryptocurrency market making.
method Event-based reinforcement learning environment, training two policy-based agents with neural networks and various reward functions.
result Improved profit and stability demonstrated over time-based approach.
Novel method reconstructs liquidity data for CLMMs, optimizing dynamic liquidity strategies.
problem Challenges in evaluating and optimizing CLMMs due to lack of historical liquidity data.
method Reconstructs historical liquidity states from swap transaction data using machine learning.
result Identifies outperformance of dynamic liquidity strategies over uniform allocation benchmarks.
New metric to measure liquidity position PNL, delta hedging algorithm for automated market makers.
problem Vulnerability of liquidity positions to price changes in underlying assets.
method Proposes a new metric for measuring PNL, delta hedging algorithm for various AMMs.
result New metric more accurately measures net value change due to price movement.
Deep Q-Learning system for straddle options in volatile markets.
problem High computational costs and unstable performance in high-volatility markets.
method Attention mechanisms in Transformer-DDQN, novel reward function, and resistance level identification.
result Transformer-DDQN model exhibits lowest maximum drawdown and highest average return.
We analyze impermanent loss in AMMs and show G3Ms are simplest.
problem Understanding impermanent loss in automated market makers.
method Developed a general framework and analyzed Geometric Mean Market Makers (G3Ms).
result G3Ms have the simplest impermanent loss characteristics.
The paper establishes axioms for AMMs to ensure fair pricing and fee structures.
problem Ensuring fair and efficient pricing in decentralized finance (DeFi) AMMs.
method Formulating axioms on utility functions to characterize swap sizes and pricing oracles.
result Most existing AMMs satisfy the proposed axioms, and a new AMM is proposed with desirable properties.
This paper improves capital efficiency in AMM protocols with leverage.
problem Improving capital efficiency in Automated Market Makers (AMM).
method Formalizes leveraged liquidity provisioning, defines margin level, assets, and debt.
result Leveraged liquidity positions are safe and possess desirable properties.
This paper analyzes and compares different Automated Market Maker mechanisms.
problem Impermanent loss in Constant Function Market Makers.
method Mean-Variance analysis of liquidity providers' profit and loss, comparison of different mechanisms.
result Optimized oracle-based mechanisms outperform Constant Function Market Makers.
Study analyzes impact of concentrated liquidity on trading fees and provider returns.
problem Impact of concentrated liquidity on trading fees and provider returns.
method Comparison of average liquidity provider returns before and after concentrated liquidity introduction; quantification of fundamental strategies performance.
result Concentrated liquidity strategies outperform in certain trading pairs and market conditions.
Adaptive market maker curves minimize arbitrage losses in DeFi.
problem Asset trading prices in AMMs trail behind centralized exchanges, causing LP losses.
method Adapts market maker bonding curves to trader behavior using a differential equation derived from the Glosten-Milgrom model.
result Optimal adaptive curves minimize arbitrage losses while remaining competitive.
Backtesting framework for CLMMs on Uniswap V3 reduces reward estimation error.
problem Estimating rewards for CLMMs in Uniswap V3 liquidity pools.
method Parametric model for liquidity distribution, historical data analysis.
result Error in reward estimation less than 1% for each pool.
Modeling price dynamics in AMMs with fees using geometric Brownian motion.
problem Understanding price dynamics in AMMs with transaction fees.
method Geometric Brownian motion, local times, excursion theory.
result Derivation of time-changed representation and limiting behavior of AMM prices.
Study coevolutionary trading-agent dynamics in continuous strategies.
problem Understanding adaptive trading-agent interactions in complex markets.
method Experimental study of adaptive automated trading agents in a continuous strategy space.
result High-dimensional coevolutionary dynamics pose challenges in market analysis.
Study shows time matters in automated trading, improving simple strategies over complex ones.
problem Effects of reaction speed and trading urgency on automated trading strategies.
method Simulated financial markets with public limit order book and continuous double auction matching. Examined reaction speed and trading urgency.
result Simple strategies outperform complex ones when considering reaction speed and trading urgency.
This paper examines the uniform properties of AMMs in cryptocurrency markets.
problem Theoretical uniformity of AMMs despite diverse strategies.
method Derives a universal formula for liquidity provisioning and compares models.
result Constant function and token swap models are equivalent under uniform liquidity.
SHIFT simulates realistic financial markets for research and industry.
problem Creating a realistic simulation platform for financial market research.
method Developed a highly realistic financial market simulator with multiple traders and assets.
result Demonstrated that automated agents can produce price processes similar to real markets.
The paper analyzes how automated market makers can retain trading fees.
problem How automated market makers can sustainably retain a portion of trading fees.
method Modeling to determine the optimal take rate for AMMs to maximize their revenue.
result AMMs can sustainably set a non-zero take rate if they have loyal trade volume.
No fair and strategy-proof automated market maker exists for more than two assets.
problem Designing a fair and strategy-proof automated market maker for multiple assets.
method Analyzing the weighted-product family of aggregation rules and their properties.
result No aggregation rule is both fair and strategy-proof for more than two assets.
AI model automates financial investment research tasks.
problem Manual labor-intensive tasks in financial analysis.
method Fine-tuning language models on diverse financial data.
result Improved model performance in financial tasks.