We consider a stochastic game between a trader and a central bank in a target zone market with a lower currency peg. This currency peg is maintained by the central bank through the generation of permanent price impact, thereby aggregating an ever increasing risky position in foreign reserves. We describe this situation…
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48 results for “currency peg”
Central bank strategy to maintain currency exchange rate within limits.
problem Maintaining a currency exchange rate within a target zone despite adverse economic trends.
method Modeling the problem with a continuous-time market impact model and solving it as a stochastic control problem.
result Optimal strategy minimizes accumulated inventory of foreign currency.
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.
Model predicts depegging dynamics of stablecoins like Tether and Bitcoin.
problem Understanding depegging effects of stablecoins on cryptocurrencies.
method Multivariate Hawkes process model.
result Numerical example shows model's effectiveness.
Model predicts majority of countries will prefer BRI over USD by 2020.
problem Predicting currency preferences in global trade networks.
method Opinion formation model based on UN Comtrade database, Monte Carlo simulations.
result By 2020, majority of countries prefer BRI over USD.
Study option pricing in sideways markets and target zones.
problem Option pricing in sideways markets and target zones.
method Closed-form option pricing formulas for sideways markets and target zones.
result Closed-form option pricing formulas for sideways markets and target zones.
This paper uses a mean-field game to model stablecoin market dynamics and recovery.
problem Understanding who restores the peg during de-pegging events of stablecoins.
method Dynamic, agent-based mean-field game framework for fiat-collateralized stablecoins.
result The equilibrium formulation endogenously maps market frictions into a price path and order flows, allowing for stress testing and attribution of peg-reverting pressure.
Rectangular peg problem solved for many curves.
problem Rectangular peg problem for continuous Jordan curves.
method Microlocal sheaf theory and recent work of Greene and Lobb.
result Affirmative answer for a large class of rectifiable curves.
The nature of monetary arrangements is often discussed without any reference to its detailed construction. We present a graph representation that allows for a clear understanding of modern monetary systems. First, we show that systems based on commodity money are incompatible with credit. We then study the current char…
The paper proves that any smooth curve can have two similar inscribed rectangles.
problem Finding two similar inscribed rectangles in a smooth Jordan curve.
method Lagrangian Floer homology and differential topological computation.
result Generic doubling of inscribed rectangles in smooth Jordan curves.
The paper analyzes liquidity in decentralized finance, deriving impact functions and de-pegging risks.
problem Understanding and quantifying market impact and de-pegging risk in decentralized finance.
method Derives market impact functions for optimal-growth liquidity providers, views Constant Product Market Maker as a Carnot engine, and links de-pegging risks to catastrophe bonds.
result New insights into liquidity models and de-pegging risks in decentralized finance.
The square-peg problem is solved using configuration spaces and multijet transversality.
problem Proving that every simple closed curve in the plane has an odd number of inscribed squares.
method Using the multijet transversality theorem and configuration spaces, we find a dense set of smooth embeddings for which the configuration space of points is transverse to any submanifold.
result A dense family of smoothly embedded circles in the plane and in have an odd number of inscribed square-like quadrilaterals.
Proves a generalized table theorem for odd Euler characteristic surfaces.
problem Proving a generalized table theorem for surfaces with odd Euler characteristic.
method Using the square peg problem for smooth curves, the result is generalized to real valued functions on Riemannian surfaces with odd Euler characteristic.
result Proves the table conjecture for even functions on the two sphere.
The Rectangular Peg Problemmath.GT
Rectangles can fit on smooth curves, proving a theorem about Klein bottles.
problem Fitting rectangles on smooth curves.
method Shevchishin's theorem about Klein bottle embeddings.
result Similar rectangles can be placed on smooth Jordan curves.
Square-like quadrilaterals inscribed in space curves proven for finite total curvature.
problem Square-peg problem in space curves.
method Local curvature analysis and limiting argument on approximating curves.
result Every embedded curve with finite total curvature has an inscribed square-like quadrilateral.
On the square peg problemmath.GT
Square can fit inside curves close to smooth ones.
problem Finding inscribed squares in nearly smooth curves.
method Using curvature and a map to relate curves, proving existence of inscribed squares.
result Curves close to smooth ones contain inscribed squares.
Systematization of Knowledge: Synthetic Assets, Derivatives, and On-Chain Portfolio Managementq-fin.GN
This paper systematizes knowledge on synthetic assets in crypto.
problem Disparate academic literature on synthetic assets in crypto.
method Broad perspective, general framework, data-driven analyses.
result Highlights risks and areas of research interest in synthetic assets.
Optimal control of reserve assets for stablecoins to maintain peg stability.
problem Balancing immediate liquidity and yield on reserve assets for stablecoin peg maintenance.
method Developed a stochastic model predictive control framework with moment closure for event intensities, incorporating a soft-thresholding structure for rebalancing.
result Optimal policy shifts predictably toward cash as expected outflows intensify or windows lengthen, preserving most bill carry in calm markets and quickly building cash during stress.
Silkswap models stablecoin trading with minimal price impact.
problem Efficient trading of fiat-pegged stablecoins with minimal price impact.
method Silkswap uses an invariant price impact curve for asymmetric trading, derived from a hybrid function.
result Silkswap outperforms Curve Finance in price impact for stablecoin trading.
We present a simplistic model of the competition between different currencies. Each individual is free to choose the currency that minimizes his transaction costs, which arise whenever his exchanging relations have chosen a different currency. We show that competition between currencies does not necessarily converge to…
Correlation Networks Among Currenciesphysics.soc-ph
By analyzing the foreign exchange market data of various currencies, we derive a hierarchical taxonomy of currencies constructing minimal-spanning trees. Clustered structure of the currencies and the key currency in each cluster are found. The clusters match nicely with the geographical regions of corresponding countri…
Paper examines pricing and hedging for cross-currency swaps referencing backward-looking rates.
problem Pricing and hedging cross-currency swaps with backward-looking rates.
method Uses interest rate and currency futures for hedging, analyzes arbitrage-free multi-curve setting.
result Explicit pricing and hedging results for CCBS with backward-looking rates.
Bitcoins have emerged as a possible competitor to usual currencies, but other crypto-currencies have likewise appeared as competitors to the Bitcoin currency. The expanding market of crypto-currencies now involves capital equivalent to US Dollars, providing academia with an unusual opportunity to study the em…
This paper investigates the hedging performance of pegged foreign exchange market in a regime switching (RS) model introduced in a recent paper by Drapeau, Wang and Wang (2019). We compare two prices, an exact solution and first order approximation and provide the bounds for the error. We provide exact RS delta, approx…
Abstract framework for cross-currency interest rate contracts.
problem Handling cross-currency markets with collateral and incompleteness.
method Developed a general HJM framework for abstract market indices.
result Enabled simultaneous description of multiple currency interest rate products.
Brazil proposes a new BRICS trade currency to dominate international trade.
problem Dominance of BRICS currency in international trade.
method Mathematical model of influence battle between three currencies, using trade flows and weights in global trade.
result By 2012, about 58% of countries preferred trading with the BRICS currency.
Stablecoin Design with Adversarial-Robust Multi-Agent Systems via Trust-Weighted Signal Aggregationq-fin.RM
Stablecoin system improves resilience to extreme market events.
problem Vulnerability of stablecoins to extreme volatility and adversarial attacks.
method MVF-Composer uses multi-agent simulations to stress-test and down-weight manipulative signals.
result Reduces peak peg deviation by 57% and mean recovery time by 3.1x under adversarial conditions.
World currency network constitutes one of the most complex structures that is associated with the contemporary civilization. On a way towards quantifying its characteristics we study the cross correlations in changes of the daily foreign exchange rates within the basket of 60 currencies in the period December 1998 -- M…
Pricing Exchange Rate Options and Quanto Caps in the Cross-Currency Random Field LIBOR Market Modelq-fin.PR
Develops a new model for cross-currency derivatives pricing.
problem Pricing cross-currency derivatives in a complex market model.
method Introduces a random field LIBOR market model to handle uncertainty in forward LIBOR rates.
result Derives exact and approximate pricing formulas for various derivatives.
Complexity characteristics of currency networksphysics.soc-ph
A large set of daily FOREX time series is analyzed. The corresponding correlation matrices (CM) are constructed for USD, EUR and PLZ used as the base currencies. The triangle rule is interpreted as constraints reducing the number of independent returns. The CM spectrum is computed and compared with the cases of shuffle…
We analyze structure of the world foreign currency exchange (FX) market viewed as a network of interacting currencies. We analyze daily time series of FX data for a set of 63 currencies, including gold, silver and platinum. We group together all the exchange rates with a common base currency and study each group separa…
New digital currency aims for equal wealth distribution.
problem Inequality in cryptocurrency wealth distribution.
method Egalitarian coin minting and joint minting across communities.
result Achieves global distributive justice in wealth distribution.
Study multi-currency markets with multiple interest rates and collateral.
problem Characterize absence of arbitrage in a multi-currency market.
method Generalize results from Bielecki and Rutkowski (2015) to a multi-currency framework, linking with Piterbarg (2012), Moreni and Pallavicini (2017), and Fujii et al. (2010b). Characterize absence of arbitrage without collateral, then study collateralization schemes under various conventions.
result Complete study of absence of arbitrage and pricing in multi-currency markets with multiple interest rates and collateral.
Hybrid method reveals true currency correlations.
problem Identify currency status in foreign exchange networks.
method Combines DCCC and network deconvolution to filter indirect effects.
result Reflects currency status changes and is more stable.
Study on collateral currency impact in differential swaps valuation.
problem Impact of collateral currency on differential swap valuation and risk management.
method Replication using futures, explicit pricing and hedging strategies.
result Choice of collateral currency can introduce additional risk exposures.
It is well known that traded foreign exchange forwards and cross currency swaps (CCS) cannot be priced applying overnight cash and carry arguments as they imply absence of funding advantage of one currency to the other. This paper proposes a heuristic present value concept for multi-currency pricing and hedging which a…
The study reveals the hierarchical structure of the international FOREX market using currency fluctuation distribution similarities.
problem Understanding the hierarchical structure of the international FOREX market.
method Using Jensen-Shannon divergence to quantify the similarity between normalized logarithmic return distributions of currencies.
result Clusters of currencies are consistent with the nature of underlying economies but diverge during crises.
In this paper an econophysics model for the currency exchange operations with commission is proposed. With this purpose some analogies and similarities of the processes that take place in the frame of the electrochemical system made from electrodes sunk into a solution of electrolytes and the process of the currency ex…
Gold and currency markets form a unique pair with specific interactions and dynamics. We focus on the efficiency ranking of gold markets with respect to the currency of purchase. By utilizing the Efficiency Index (EI) based on fractal dimension, approximate entropy and long-term memory on a wide portfolio of 142 gold p…
New method learns time-invariant rewards from demonstrations.
problem Learning robust rewards for tasks with varying execution times.
method Model-based inverse reinforcement learning with time-invariant costs.
result Approach enables learning from misaligned demonstrations and generalizes spatially.
Time-scale dependence of correlations among foreign currenciescond-mat.stat-mech
For the purpose of elucidating the correlation among currencies, we analyze daily and high-resolution data of foreign exchange rates. There is strong correlation for pairs of currencies of geographically near countries. We show that there is a time delay of order less than a minute between two currency markets having a…
We examine the problem of dynamic reserving for risk in multiple currencies under a general coherent risk measure. The reserver requires to hedge risk in a time-consistent manner by trading in baskets of currencies. We show that reserving portfolios in multiple currencies are time-consistent when (and only…
We develop the first basic Operational Risk perspective on key risk management issues associated with the development of new forms of electronic currency in the real economy. In particular, we focus on understanding the development of new risks types and the evolution of current risk types as new components of financia…
Study shows variance gamma model outperforms Black-Scholes for USD-INR currency options.
problem Complex pricing of currency options with multi-assets.
method Examined USD-INR currency options, tested several models, compared performance.
result Variance gamma model outperforms Black-Scholes model in various volatility regimes.
Digital currencies and cryptocurrencies have hesitantly started to penetrate the investors, and the next step will be the regulatory risk management framework. We examine the Value-at-Risk and Expected Shortfall properties for the major digital currencies, Bitcoin, Ethereum, Litecoin, and Ripple. The methodology used i…
This paper investigates and compares currency substitution between the currencies of Central and Eastern European (CEE) countries and the euro. In addition, we develop a model with microeconomic foundations, which identifies difference between currency substitution and money demand sensitivity to exchange rate variatio…
A new approach for pricing FX options that uses a single model for all markets.
problem Consistent pricing of FX options across different markets.
method Intermediate currency approach, calibrating to domestic market volatility smile.
result Model automatically reproduces correct foreign market volatility smiles.
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.