Study finds Indian mutual funds adjust cash holdings based on inflows, impacting stock purchases.
problem Active liquidity management by mutual funds in India.
method Examined cash holdings and stock purchases of Indian equity mutual funds.
result Funds with active liquidity choices outperform, highlighting the importance of this strategy.
Third part of a study on liquidity risk in asset management, focusing on managing the asset-liability liquidity risk.
problem Managing the asset-liability liquidity risk in asset management.
method Develops a methodological and practical framework for liquidity stress testing programs.
result Proposes measurement, management, and monitoring tools for controlling the liquidity gap.
Research proposes a model to estimate transaction costs and assess asset liquidity risk.
problem Lack of standardized models for asset liquidity risk in asset management.
method Develops a market impact model and a two-regime model based on power-law property.
result Defines liquidity measures and applies model to stocks and bonds.
This research proposes methods to model and assess liability liquidity risk in asset management.
problem Lack of standardized models for liability liquidity risk in asset management.
method Statistical models, zero-inflated models, aggregate and individual-based approaches, and factor models.
result Developed mathematical and statistical approaches to estimate and assess redemption shocks.
Optimizes liquidations in decentralized finance to manage credit risk.
problem Managing and liquidating positions in decentralized finance exchanges.
method Formulated as an ergodic optimal control problem, derived closed-form solutions for optimal liquidation strategies.
result Closed-form solutions balance immediate executions with price impacts and long-term rewards.
Paper introduces balanced payment systems to improve liquidity and risk management.
problem Managing liquidity in payment systems and economy is a persistent challenge.
method Introduces interbank balancing method to private payment systems and others.
result Demonstrates effects of balancing on a small example and constructs a balanced subsystem.
Study liquidity provision in decentralized exchanges considering risk aversion and replication costs.
problem Economic viability of liquidity provision in decentralized exchanges (DEXs).
method Formulated strategic interactions as a sequential game with risk-averse LP, traders, and arbitrageurs.
result DEX liquidity depth is crucial for risk management, influenced by risk aversion and replication costs.
The paper examines how insurers manage risks and liquidity in a dynamic market.
problem Model uncertainty in insurance pricing and competitive equilibrium.
method Analyzes insurers' robustness preferences and optimization strategies for underwriting and liquidity management.
result Robust insurance pricing leads to higher premiums and equity valuations compared to a benchmark.
High-fee pools attract more liquidity but execute less volume; low-fee pools have more stable LPs.
problem Optimal liquidity supply and execution on decentralized exchanges with fixed gas costs.
method Analysis of Uniswap data to compare high- and low-fee pools.
result Fragmented liquidity leads to more LPs and competition, improving overall market efficiency.
Investigates optimal strategies for market makers using internal liquidity.
problem Optimizing strategies for market makers with internal liquidity.
method Investigates optimal multi-objective strategy for market makers with internal liquidity.
result Draws important qualitative insights for real-world trading.
The kind of realized mission inflows the sensitivity to risk. Among other factors, the risk results from decision about liquid assets investment level and liquid assets financing. The higher the risk exposure, the higher the level of liquid assets. If the specific risk exposure is smaller, the more aggressive could be …
A new AMM mechanism reduces losses and maximizes revenue from orderflows.
problem Reduces losses to informed orderflow and maximizes revenue from uninformed orderflow.
method Runs an onchain auction for pool manager role, allowing fee setting and price sensitivity.
result Proves higher liquidity in equilibrium compared to standard AMMs.
dYdX updates liquidity provider incentives to enhance trading efficiency.
problem Incentivizing liquidity providers to maintain efficient market structures.
method Analyzed various metrics (makerVolume, depths, spreads) and used historical trades to update the LP Incentives Programme.
result Updated the LP Incentives Programme to encourage more active and efficient liquidity.
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.
Study analyzes risk management in Aave and Compound lending protocols, finding v3 better than v2.
problem Risk management in decentralized lending protocols.
method Cross-version and cross-chain analysis using fixed effects model.
result v3 protocols have better risk management, with stronger impact on L2 blockchains.
Study optimizes Bitcoin futures hedging to reduce liquidation risk.
problem Optimizing hedging strategies to minimize liquidation risk in Bitcoin futures.
method Derived a semi-closed form optimal hedging strategy considering spot and futures extreme returns, loss aversion, leverage, and collateral management.
result Optimal strategy reduces both hedged portfolio variance and liquidation probability.
Optimized execution model using interbank and internal liquidity.
problem Minimizing market impact in trading.
method Integrates interbank limit and market orders with internal market-making liquidity.
result Reduces market impact and improves execution efficiency.
Developed concentrated liquidity in n-dimensional AMM with polar coordinates in Rust.
problem Risk of stacking too many stablecoin pools.
method Building concentrated liquidity positions with ticks in polar coordinates in Rust.
result Hedging risk of stacking stablecoin pools.
Model uses Navier-Stokes equations to assess liquidity and systemic risk.
problem Traditional models fail to capture real market fluctuations and extreme events.
method Develops and validates a mathematical model based on Navier-Stokes equations, incorporating 13 macroeconomic and financial parameters.
result Model effectively describes liquidity dynamics, systemic risk, and extreme scenarios.
We develop an optimal currency hedging strategy for fund managers who own foreign assets to choose the hedge tenors that maximize their FX carry returns within a liquidity risk constraint. The strategy assumes that the offshore assets are fully hedged with FX forwards. The chosen liquidity risk metric is Cash Flow at R…
Zero-Liquidation loans protect ETH borrowers from liquidation risks.
problem Risk of liquidation in DeFi lending protocols.
method Allows borrowers to repay in either USDC or pledged ETH, compensating liquidity providers with higher yield.
result More robust and less contagion-prone lending compared to traditional protocols.
Develops a new model to better estimate cryptocurrency and stock volatility.
problem Misrepresentation of volatility and co-movement in traditional models.
method Introduces liquidity-sensitive multivariate volatility framework with novel liquidity measures.
result Liquidity-adjusted models yield more stable and interpretable risk structures.
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.
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.
The paper calculates optimal trading turnover in terms of asset liquidity and alpha autocorrelation.
problem Understanding optimal trading turnover in the context of asset liquidity and alpha autocorrelation.
method Developed a Gaussian process model to compute steady-state turnover explicitly, relating it to asset liquidity and alpha autocorrelation.
result Steady-state optimal turnover is given by γ n + 1 γ\sqrt{n+1} γ n + 1 , where γ γ γ is a liquidity-adjusted risk-aversion and n n n is the mean-reversion speed ratio. UAMM uses external market prices to improve AMM efficiency and reduce liquidity provider risk.
problem Traditional AMMs lack consideration of external markets and risk management.
method UAMM calculates prices by incorporating external market prices and impermanent loss, maintaining constant product curve properties.
result UAMM eliminates arbitrage opportunities when external market prices are efficient, reducing liquidity provider risk.
Uniswap V3 requires more decisions from liquidity providers, making it complex and risky.
problem Complexity and risk in liquidity provision on Uniswap V3.
method Developed a theoretical model and analyzed real data.
result Liquidity provision on Uniswap V3 is highly complex and risky.
Decentralized prediction markets use AMMs to pool and withdraw liquidity, improving financial properties.
problem Creating a fair and efficient decentralized prediction market.
method Developed a liquidity-based AMM structure for prediction markets, studied liquidity management, and proposed trading fees.
result The decentralized AMM structure satisfies financial properties and can be managed with liquidity withdrawal.
The study examines stock splits and their effects on companies, managers, and shareholders.
problem Misunderstandings and confounding factors around stock splits and their impacts.
method Selected database analysis of nine recent events, examining market impact, trading volume, and shareholder base.
result Stock splits enhance trading volume, increase shareholder base, and improve market liquidity.
RAmmStein optimizes liquidity management in AMMs by learning to rebalance efficiently.
problem Optimal control of concentrated liquidity in decentralized exchanges.
method Formulates as an optimal control problem, uses Deep Reinforcement Learning with HJB-QVI.
result Achieves highest net ROI (1.60%) compared to greedy strategies, reduces rebalancing frequency by 85%.
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.
The paper models insurance market dynamics under uncertainty and financial frictions.
problem Modeling insurer behavior under uncertainty and financial frictions.
method Dynamic equilibrium model of insurance market with competitive insurers maximizing shareholder value.
result Investment can lead to lower insurance prices and negative loadings under certain conditions.
PEARL uses AI to replicate private equity performance with liquid assets.
problem Lack of access to private equity due to high costs and complexity.
method Combines AI with liquid assets, incorporating asymmetry for better performance.
result Model outperforms liquid proxies and aligns with private equity benchmarks.
The study examines how limited liability and haircut affect a bank's loan portfolio's liquidity risk.
problem Impact of limited liability and haircut on a bank's loan portfolio's liquidity risk.
method Constructed a novel loan portfolio model with limited liability and haircut constraint, analyzed at three time steps.
result Model with haircut constraint leads to lesser liquidity risk.
The paper develops a new framework for pricing and hedging liquidity in crypto markets.
problem Arbitrage and risk management in crypto market making.
method Developed a new mathematical framework using a coordinate system defined by price and intrinsic liquidity.
result Established a linear dependence of asset reserves and value functions on intrinsic liquidity, facilitating arbitrage-free pricing and delta hedging.
Agent optimizes perpetual contract liquidation with transaction costs and risk.
problem Optimizing perpetual contract liquidation with transaction costs and risk.
method Solving stochastic control problem for optimal trading strategy.
result Closed-form expression and approximations for optimal strategy.
Deep learning improves portfolio management by optimizing asset weights.
problem Traditional portfolio managers are outperformed by deep learning models in trading.
method Proposes a deep reinforcement learning portfolio manager that allocates weights to assets.
result The proposed portfolio manager outperforms conventional managers in risk-adjusted returns.
Study cash-flow forecasting for derivatives, aligning with replication strategy and addressing timing frictions.
problem Inconsistencies in cash-flow forecasting under different measures and stochastic payment times.
method Use discounting sensitivities (funding-curve hedge ratios) for replication and propose a liquidity valuation adjustment.
result Aligns forecasting with replication strategy and avoids measure-mixing issues.
Exchange improves liquidity by using different bid and ask tick sizes.
problem Improving liquidity quality in financial markets.
method Model with uncertainty zones to analyze bid and ask side-specific tick sizes.
result Suitable side-specific tick sizes enhance liquidity provision.
A new framework assesses liquidity risk in perpetual futures exchanges.
problem Measuring and predicting liquidation execution risk in perpetual futures markets.
method Slippage-at-Risk (SaR) framework, comprising three metrics: cross-sectional slippage quantile, expected slippage, and aggregate dollar-denominated tail slippage.
result SaR provides a forward-looking assessment of liquidation execution risk, predictive of systemic stress.
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.
Myopic optimization outperforms reinforcement learning in portfolio management, leading to lower returns and higher risks.
problem Reinforcement learning strategies in portfolio management yield lower or negative returns and higher risks compared to myopic optimization.
method Modeling execution/liquidation frictions with mark-to-market accounting, using Malliavin calculus to derive policy gradients and risk shadow price, and quantifying phantom profit.
result Myopic optimization outperforms reinforcement learning in portfolio management, leading to better returns and lower risks.
Management of the portfolios containing low liquidity assets is a tedious problem. The buyer proposes the price that can differ greatly from the paper value estimated by the seller, the seller, on the other hand, can not liquidate his portfolio instantly and waits for a more favorable offer. To minimize losses in this …
Brokers and an informed trader compete for liquidity, affecting trading costs and inventory risk.
problem How brokers and an informed trader manage liquidity and trading costs.
method Sequential Stackelberg game, solving for trading strategies, numerical solutions.
result Equilibrium strategies and liquidity prices determined, not Pareto efficient.
Investing in cryptocurrencies can improve portfolio risk-return profile, especially with diversification strategies.
problem Investing in cryptocurrencies and evaluating their potential for portfolio allocation strategies.
method Investigated different types of investors, various portfolio construction rules, and incorporated liquidity constraints.
result Cryptocurrencies can improve the risk-return profile of portfolios, especially with diversification strategies.
Study examines new financial metrics and their implications for trading and risk management.
problem Liquidity and price dynamics in financial markets.
method High-frequency trading data, ARMA(1,1)-GARCH(1,1) model, normal inverse Gaussian distribution, option pricing model, Rachev ratio.
result New financial metrics (TMOBBAS, GMP) have heavy-tailed distributions and significant deviations from normality.
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.
Paper proposes real-time risk metrics for stablecoin protocols.
problem Lack of risk management frameworks for stablecoins.
method Developed two risk metrics: capitalization and liquidity.
result Demonstrated practical benefits of real-time on-chain data.