Study analyzes factors affecting profits in crypto liquidity provision.
problem Liquidity providers lack guidance for developing profitable strategies.
method Developed a measurement model based on impermanent loss to analyze key parameters.
result Uncovered influences of key parameters on LPs' profits.
Optimal strategy for liquidating portfolios under discrete time intervals.
problem Optimizing liquidation of portfolios with discrete time constraints and impact effects.
method Modeling portfolio liquidation with N risky assets, using VaR for cost measurement, and deriving an optimal liquidation time.
result The optimal liquidation time is only influenced by temporary price impacts, not permanent ones.
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.
Optimal early liquidation strategy reduces financial losses during crises.
problem Substantial losses from simultaneous asset liquidation at depressed prices.
method Developed a worst-case approach for optimal early liquidation, considering uncertainty of other banks' decisions.
result Proposed robust optimal strategy maximizes liquid assets' value at clearing, even with uncertainty.
Unified framework for optimal liquidation with small market impact and semimartingale strategies.
problem Optimal liquidation under small market impact and portfolio liquidation.
method Semimartingale strategies and convergence results for BSDEs with singular terminal conditions.
result Unified framework for embedding two common liquidation models and microscopic foundation for semimartingale strategies.
This paper provides a framework for modeling the financial system with multiple illiquid assets during a crisis. This work generalizes the paper by Amini, Filipovic and Minca (2016) by allowing for differing liquidation strategies. The main result is a proof of sufficient conditions for the existence of an equilibrium …
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 …
New method identifies algo trading strategies as liquidity consumers or providers.
problem Determining if algo trading strategies consume or provide liquidity.
method Analyzes trade and price history to classify strategies as liquidity consumers or providers.
result Identifies net liquidity consumption or provision of algo trading strategies.
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.
In this paper, we generalize the Almgren-Chriss's market impact model to a more realistic and flexible framework and employ it to derive and analyze some aspects of optimal liquidation problem in a security market. We illustrate how a trader's liquidation strategy alters when multiple venues and extra information are b…
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.
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.
Study long-term asset liquidation behavior with external flows.
problem Investigate optimal liquidation in presence of external flows.
method Convergence analysis of BSDEs for value function and strategy.
result Long-term liquidation may not occur due to external flows.
When executing their orders, investors are proposed different strategies by brokers and investment banks. Most orders are executed using VWAP algorithms. Other basic execution strategies include POV (also called PVol) -- for percentage of volume --, IS -- implementation shortfall -- or Target Close. In this article ded…
This paper provides a framework for modeling the financial system with multiple illiquid assets when liquidation of illiquid assets is caused by failure to meet a leverage requirement. This extends the network model of Cifuentes, Shin & Ferrucci (2005) which incorporates a single asset with fire sales and capital adequ…
Inspired by Strotz's consistent planning strategy, we formulate the infinite horizon mean-variance stopping problem as a subgame perfect Nash equilibrium in order to determine time consistent strategies with no regret. Equilibria among stopping times or randomized stopping times may not exist. This motivates us to cons…
Study optimizes portfolio liquidation strategies with complex market impacts.
problem Optimizing portfolio liquidation with transient market impacts and self-exciting order flow.
method Mean-field control problem with semimartingale strategies, passing to continuous-time limit, and solving Riccati equations.
result Existence of optimal strategy with jumps only at start and end of trading period.
We assume a continuous-time price impact model similar to Almgren-Chriss but with the added assumption that the price impact parameters are stochastic processes modeled as correlated scalar Markov diffusions. In this setting, we develop trading strategies for a trader who desires to liquidate his inventory but faces pr…
This paper optimizes liquidation strategies in DeFi protocols to prevent MEV attacks.
problem Predatory price manipulations and Maximal Extractable Value (MEV) attacks in DeFi protocols.
method Dynamic program modeling, Constant Product Market Maker (CPMM) transaction fees analysis.
result CPMM transaction fees make liquidation manipulations unprofitable for attackers.
We consider the problem of portfolio optimization in the presence of market impact, and derive optimal liquidation strategies. We discuss in detail the problem of finding the optimal portfolio under Expected Shortfall (ES) in the case of linear market impact. We show that, once market impact is taken into account, a re…
Study optimal liquidation strategies under partial information in high-frequency trading.
problem Optimal liquidation strategies in high-frequency trading with incomplete information.
method Modeling price formation through Hawkes processes, incorporating liquidity as a hidden Markov process, and formulating as an impulse control problem.
result Development of an algorithm to approximate optimal liquidation strategies.
Paper analyzes liquidity for everlasting options in DeFi, offering strategies to reduce costs.
problem Challenges of perpetual derivatives in decentralized finance markets.
method Dynamic proactive market maker model, simulations, hedging strategies.
result Liquidity providers can achieve net positive PnL with effective strategies.
Study optimal liquidation strategies on Uniswap v2/v3 considering price impact.
problem Optimal liquidation of large positions on Uniswap v2/v3 under transient price impact.
method Dynamic programming and numerical approximation for Uniswap v3, closed-form solutions for v2.
result Obtained optimal strategies for both Uniswap v2 and v3, showing how liquidity profile influences them.
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.
We study an optimal liquidation problem under the ambiguity with respect to price impact parameters. Our main results show that the value function and the optimal trading strategy can be characterized by the solution to a semi-linear PDE with superlinear gradient, monotone generator and singular terminal value. We also…
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.
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…
This paper studies liquidity providers in decentralized exchanges.
problem Understanding how liquidity providers behave in DEXes.
method Analyzed operations on Uniswap, measured investment strategy, returns, and risks.
result Liquidity providers benefit from transaction fees and determine their strategy based on market changes.
In this article, we develop a general framework to study optimal execution and to price block trades. We prove existence of optimal liquidation strategies and we provide regularity results for optimal strategies under very general hypotheses. We exhibit a Hamiltonian characterization for the optimal strategy that can b…
This paper extends liquidity returns in geometric mean markets to time-varying weights.
problem Understanding returns and no-arbitrage prices in geometric mean markets with time-varying weights.
method Extending known results for constant-weight G3Ms to the general case of G3Ms with time-varying and potentially stochastic weights.
result LP shares can replicate the payoffs of financial derivatives and various trading strategies.
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.
The paper analyzes optimal liquidation strategies for cryptocurrencies considering both temporary and permanent price impacts.
problem Optimal liquidation strategies for cryptocurrencies in the presence of price impacts.
method Analytical and numerical solutions, including finite differences and optimal policy iteration.
result Optimal liquidation policies vary based on the functional form of temporary and permanent price impacts.
Latency (i.e., time delay) in electronic markets affects the efficacy of liquidity taking strategies. During the time liquidity takers process information and send marketable limit orders (MLOs) to the exchange, the limit order book (LOB) might undergo updates, so there is no guarantee that MLOs are filled. We develop …
Develops optimal trading strategy for illiquid currency pairs.
problem Maximizes revenues for a broker liquidating an illiquid currency pair.
method Uses a currency triplet strategy, considering model ambiguity, and employs simulations.
result Mean P&L increases and standard deviation decreases as ambiguity aversion increases.
The paper analyzes game theory in convertible contracts during liquidity events.
problem Optimizing payments in convertible contracts during liquidity events.
method Defined a general model for games, showed non-existence of pure strategy Nash equilibria, developed algorithms for computing equilibria.
result Optimum pure strategy Nash equilibria exist when all contracts are of the same type (SAFE).
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.
We study optimal liquidation of a trading position (so-called block order or meta-order) in a market with a linear temporary price impact (Kyle, 1985). We endogenize the pressure to liquidate by introducing a downward drift in the unaffected asset price while simultaneously ruling out short sales. In this setting the l…
The goal of this paper is to explore the relationship between momentum effects and liquidity in cryptocurrency markets. Portfolios based on momentum-liquidity bivariate sorts are formed and rebalanced on a varying number of cryptocurrencies through time. We find a strong momentum effect in the most liquid cryptocurrenc…
Optimal trade execution in a fluctuating market with stochastic liquidity.
problem Minimizing costs in a market with unpredictable liquidity.
method Developed a recursion to find the least costly trade execution strategy.
result Explicit recursion characterizes the least costly trade execution.
New game theory approach to bond market liquidity and participant behavior.
problem Uncertainty in market maker types and regulatory structure.
method Liquidity Game theory applied to UK bond market interactions.
result Strategies and structures for market makers and regulators.
Optimal stock trading strategy with market orders and limit orders in a risky market.
problem Finding the best time and amount to place market and limit orders to minimize costs.
method Analyzes single and multi-period models with limit and market orders, considering liquidity risk.
result Optimal placement of market and limit orders can be determined under different market conditions.
Tick-by-tick liquidity provision aims to maximize fees and reserves.
problem Maximizing fees and reserves in concentrated liquidity.
method Convex optimization for tick-level liquidity provision.
result Concentrating liquidity around current price is not always best.
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.
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.
Optimizes liquidity withdrawal timing for AMM LPs to balance fees and impermanent loss.
problem Balancing fees and impermanent loss in automated market makers.
method Stochastic control problem with endogenous stopping time, numerical solutions via Euler scheme and Longstaff-Schwartz method.
result Optimal exit strategy depends on volatility, fees, and market dynamics.
In this paper, we consider the optimal portfolio liquidation problem under the dynamic mean-variance criterion and derive time-consistent solutions in three important models. We give adapted optimal strategies under a reconsidered mean-variance subject at any point in time. We get explicit trading strategies in the bas…
Optimizes liquidation strategies for assets with Levy process price dynamics.
problem Maximizing cash received from asset sale with price impact.
method Almgren-Chriss framework, constant absolute risk aversion, Levy process approximation.
result Explicit expression for optimal liquidation trajectories.
Paper tackles liquidating stocks using reinforcement learning.
problem Liquidating large quantities of highly correlated stocks efficiently.
method Stochastic optimal control and reinforcement learning.
result Minimizes overall execution shortfall of stocks.