arXiv · arXiv · 2025
As decentralized finance (DeFi) evolves, distinguishing between user behaviors - liquidity provision versus active trading - has become vital for risk modeling and on-chain reputation. We propose a behavioral scoring framework for Uniswap that assigns two complementary scores: a Liquidity Provision Score that assesses strategic liquidity contributions, and a Swap Behavior Score that reflects trading intent, volatilit…
Dhanashekar Kandaswamy, Ashutosh Sahoo, Akshay SP, Gurukiran S, Parag Paul
arXiv · arXiv · 2025
This paper applies deep reinforcement learning (DRL) to optimize liquidity provisioning in Uniswap v3, a decentralized finance (DeFi) protocol implementing an automated market maker (AMM) model with concentrated liquidity. We model the liquidity provision task as a Markov Decision Process (MDP) and train an active liquidity provider (LP) agent using the Proximal Policy Optimization (PPO) algorithm. The agent dynamica…
Haonan Xu, Alessio Brini
arXiv · arXiv · 2020
We coin the term *Protocols for Loanable Funds (PLFs)* to refer to protocols which establish distributed ledger-based markets for loanable funds. PLFs are emerging as one of the main applications within Decentralized Finance (DeFi), and use smart contract code to facilitate the intermediation of loanable funds. In doing so, these protocols allow agents to borrow and save programmatically. Within these protocols, inte…
Lewis Gudgeon, Sam M. Werner, Daniel Perez, William J. Knottenbelt
arXiv · arXiv · 2015
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 characteristics of observable market dynamics. In the second part of the paper this calculus is used in a…
Vladislav Gennadievich Malyshkin, Ray Bakhramov
arXiv · arXiv · 2009
In this three-part series of papers, we argue that the conventional spread measures are not well defined for credit-risky bonds and introduce a set of credit term structures which correct for the biases associated with the strippable cash flow valuation assumption. We demonstrate that the resulting estimates are significantly more robust and remain meaningful even when applied to deeply distressed bonds. We also sugg…
Arthur M. Berd, Roy Mashal, Peili Wang
arXiv · arXiv · 2020
This paper compares mathematical models for automated market makers including logarithmic market scoring rule (LMSR), liquidity sensitive LMSR (LS-LMSR), constant product/mean/sum, and others. It is shown that though LMSR may not be a good model for Decentralized Finance (DeFi) applications, LS-LMSR has several advantages over constant product/mean based automated market makers. However, LS-LMSR requires complicated …
Yongge Wang
arXiv · arXiv · 2026
Small-cap-inclusive equity universes contain recently listed and intermittently traded securities, so enforcing a common look-back discards a substantial fraction of the available information. Pairwise-complete estimation preserves the longest overlap for each asset pair, but the resulting correlation matrix can be indefinite because its entries are computed on different samples. This prevents direct use in Markowitz…
Christian Bongiorno, Lorenzo Villassero
arXiv · arXiv · 2026
Let $L=(L_s)_{0\le s\le t}$ be a cumulative net-loss process and let $M_t=\sup_{0\le s\le t}L_s$. For a candidate reserve $u$ and a distortion function $g$, define $D_g^{(t)}(u)=\int_u^\infty g(P(M_t>v))d v$. This function measures the tail-weighted residual severity of the largest cumulative loss over the horizon. We derive three monetary risk measures: its value at zero reserve and two measures based on fixed and p…
Claude Lefevre, Pierre Zuyderhoff
arXiv · arXiv · 2025
Decentralized finance (DeFi) lacks centralized oversight, often resulting in heightened volatility. In contrast, centralized finance (CeFi) offers a more stable environment with institutional safeguards. Institutional backing can play a stabilizing role in a hybrid structure (HyFi), enhancing transparency, governance, and market discipline. This study investigates whether HyFi-like cryptocurrencies, those backed by i…
Ihlas Sovbetov
arXiv · arXiv · 2025
As Decentralized Finance (DeFi) develops, understanding user intent behind DeFi transactions is crucial yet challenging due to complex smart contract interactions, multifaceted on-/off-chain factors, and opaque hex logs. Existing methods lack deep semantic insight. To address this, we propose the Transaction Intent Mining (TIM) framework. TIM leverages a DeFi intent taxonomy built on grounded theory and a multi-agent…
Qian'ang Mao, Yuxuan Zhang, Jiaman Chen, Wenjun Zhou, Jiaqi Yan
arXiv · arXiv · 2025
We investigate multi-period mean-risk portfolio optimization for long-horizon Defined Contribution plans, focusing on buffered Probability of Exceedance (bPoE), a more intuitive, dollar-based alternative to Conditional Value-at-Risk (CVaR). We formulate both pre-commitment and time-consistent Mean-bPoE and Mean-CVaR portfolio optimization problems under realistic investment constraints (e.g., no leverage, no short se…
Duy-Minh Dang, Chang Chen
arXiv · arXiv · 2025
We investigate the drivers of vote delegation in Decentralized Autonomous Organizations (DAOs), using the Uniswap governance DAO as a laboratory. We show that parties with fewer self-owned votes and those affiliated with the controlling venture capital firm, Andreesen Horowitz (a16z), receive more vote delegations. These patterns suggest that while the Uniswap ecosystem values decentralization, a16z may engage in win…
Dion Bongaerts, Thomas Lambert, Daniel Liebau, Peter Roosenboom
arXiv · arXiv · 2024
We evaluate the performance and level of intergenerational cross-subsidy in flat-accrual and dynamic-accrual collective defined contribution (CDC) schemes which have been designed to be compatible with UK legislation. In the flat-accrual scheme, all members accrue the benefits at the same rate irrespective of age. This captures the most significant feature of the Royal Mail Collective Pension Plan, which is currently…
John Armstrong, James Dalby, Catherine Donnelly
arXiv · arXiv · 2023
The IFRS 9 accounting standard requires the prediction of credit deterioration in financial instruments, i.e., significant increases in credit risk (SICR). However, the definition of such a SICR-event is inherently ambiguous, given its current reliance on evaluating the change in the estimated probability of default (PD) against some arbitrary threshold. We examine the shortcomings of this PD-comparison approach and …
Arno Botha, Esmerelda Oberholzer, Janette Larney, Riaan de Jongh
arXiv · arXiv · 2023
This paper studies the effects of unexpected changes in US monetary policy on digital asset returns. We use event study regressions and find that monetary policy surprises negatively affect BTC and ETH, the two largest digital assets, but do not significantly affect the rest of the market. Second, we use high-frequency price data to examine the effect of the FOMC statements release and Minutes release on the prices o…
Antzelos Kyriazis, Iason Ofeidis, Georgios Palaiokrassas, Leandros Tassiulas
arXiv · arXiv · 2023
Decentralized finance (DeFi) is an integral component of the blockchain ecosystem, enabling a range of financial activities through smart-contract-based protocols. Traditional DeFi governance typically involves manual parameter adjustments by protocol teams or token holder votes, and is thus prone to human bias and financial risks, undermining the system's integrity and security. While existing efforts aim to establi…
Jiahua Xu, Yebo Feng, Daniel Perez, Benjamin Livshits
arXiv · arXiv · 2023
Anxiety levels in the Aave community spiked in November 2022 as Avi Eisenberg performed an attack on Aave. Eisenberg attempted to short the CRV token by using funds borrowed on the protocol to artificially deflate the value of CRV. While the attack was ultimately unsuccessful, it left the Aave community scared and even raised question marks regarding the feasibility of large lending platforms under decentralized gove…
Lioba Heimbach, Eric G. Schertenleib, Roger Wattenhofer
arXiv · arXiv · 2021
To non-experts, the traditional Centralized Finance (CeFi) ecosystem may seem obscure, because users are typically not aware of the underlying rules or agreements of financial assets and products. Decentralized Finance (DeFi), however, is making its debut as an ecosystem claiming to offer transparency and control, which are partially attributable to the underlying integrity-protected blockchain, as well as currently …
Kaihua Qin, Liyi Zhou, Yaroslav Afonin, Ludovico Lazzaretti, Arthur Gervais