arXiv · arXiv q-fin · 2026
We study the fee policy of a liquidity provider (LP) in a constant-product automated market maker (AMM) whose fee can be adjusted continuously, as enabled by programmable hooks. Building on the loss-versus-rebalancing (LVR) framework of Milionis et al. (2022) and its extension to nonzero fees by Milionis et al. (2024), we model the LP's wealth relative to the continuously rebalanced benchmark as a controlled process …
Farbod Ghasemlu
arXiv · arXiv q-fin · 2023
There is a persistent lack of funding, especially for SMEs, that cyclically worsens. The factoring and invoice discounting market appears to address delays in paying commercial invoices: sellers bring still-to-be-paid invoices to financial organizations, intermediaries, typically banks that provide an advance payment. This article contains research on novel decentralized approaches to said lending services without in…
Peplluis R. Esteva, Alberto Ballesteros Rodríguez
arXiv · arXiv q-fin · 2019
This article develops the theory of risk budgeting portfolios, when we would like to impose weight constraints. It appears that the mathematical problem is more complex than the traditional risk budgeting problem. The formulation of the optimization program is particularly critical in order to determine the right risk budgeting portfolio. We also show that numerical solutions can be found using methods that are used …
Jean-Charles Richard, Thierry Roncalli
arXiv · arXiv q-fin · 2016
Assessing the stability of economic systems is a fundamental research focus in economics, that has become increasingly interdisciplinary in the currently troubled economic situation. In particular, much attention has been devoted to the interbank lending market as an important diffusion channel for financial distress during the recent crisis. In this work we study the stability of the interbank market to exogenous sh…
Matteo Serri, Guido Caldarelli, Giulio Cimini
arXiv · arXiv q-fin · 2010
We review the evidence that the erratic dynamics of markets is to a large extent of endogenous origin, i.e. determined by the trading activity itself and not due to the rational processing of exogenous news. In order to understand why and how prices move, the joint fluctuations of order flow and liquidity - and the way these impact prices - become the key ingredients. Impact is necessary for private information to be…
Jean-Philippe Bouchaud
arXiv · arXiv q-fin · 2023
Designing dynamic portfolio insurance strategies under market conditions switching between two or more regimes is a challenging task in financial economics. Recently, a promising approach employing the value-at-risk (VaR) measure to assign weights to risky and riskless assets has been proposed in [Jiang C., Ma Y. and An Y. "The effectiveness of the VaR-based portfolio insurance strategy: An empirical analysis" , Inte…
Peyman Alipour, Ali Foroush Bastani
arXiv · arXiv q-fin · 2022
Decentralized exchanges are revolutionizing finance. With their ever-growing increase in popularity, a natural question that begs to be asked is: how efficient are these new markets? We find that nearly 30% of analyzed trades are executed at an unfavorable rate. Additionally, we observe that, especially during the DeFi summer in 2020, price inaccuracies across the market plagued DEXes. Uniswap and SushiSwap, however,…
Jan Arvid Berg, Robin Fritsch, Lioba Heimbach, Roger Wattenhofer
arXiv · arXiv q-fin · 2022
Risk parity, also known as equal risk contribution, has recently gained increasing attention as a portfolio allocation method. However, solving portfolio weights must resort to numerical methods as the analytic solution is not available. This study improves two existing iterative methods: the cyclical coordinate descent (CCD) and Newton methods. We enhance the CCD method by simplifying the formulation using a correla…
Jaehyuk Choi, Rong Chen
arXiv · arXiv q-fin · 2021
Decentralized Exchanges (DEXes) enable users to create markets for exchanging any pair of cryptocurrencies. The direct exchange rate of two tokens may not match the cross-exchange rate in the market, and such price discrepancies open up arbitrage possibilities with trading through different cryptocurrencies cyclically. In this paper, we conduct a systematic investigation on cyclic arbitrages in DEXes. We propose a th…
Ye Wang, Yan Chen, Haotian Wu, Liyi Zhou, Shuiguang Deng
arXiv · arXiv q-fin · 2019
Recent developments in the literature on financial architecture suggest that banks and markets not only coexist, but also coevolve in ways that are non-neutral from the viewpoint of optimality. This article aims to analyse the concrete mechanisms of this coevolution by focusing on a very relevant case study: Belgium (the first Continental country to industrialize) at the time of the very first emergence of a modern f…
Stefano Ugolini
arXiv · arXiv q-fin · 2019
The econometric challenge of finding sparse mean reverting portfolios based on a subset of a large number of assets is well known. Many current state-of-the-art approaches fall into the field of co-integration theory, where the problem is phrased in terms of an eigenvector problem with sparsity constraint. Although a number of approximate solutions have been proposed to solve this NP-hard problem, all are based on re…
Théophile Griveau-Billion, Ben Calderhead
arXiv · arXiv q-fin · 2016
In this survey, a short introduction in the recent discovery of log-normally distributed market-technical trend data will be given. The results of the statistical evaluation of typical market-technical trend variables will be presented. It will be shown that the log-normal assumption fits better to empirical trend data than to daily returns of stock prices. This enables to mathematically evaluate trading systems depe…
René Kempen, Stanislaus Maier-Paape
arXiv · arXiv q-fin · 2016
Geometric phases describe how in a continuous-time dynamical system the displacement of a variable (called phase variable) can be related to other variables (shape variables) undergoing a cyclic motion, according to an area rule. The aim of this paper is to show that geometric phases can exist also for discrete-time systems, and even when the cycles in shape space have zero area. A context in which this principle can…
Claudio Altafini
arXiv · arXiv q-fin · 2014
After the release of the final accounting standards for impairment in July 2014 by the IASB, banks will face the next significant methodological challenge after Basel 2. In this paper, first methodological thoughts are presented, and ways how to approach underlying questions are proposed. It starts with a detailed discussion of the structural conservatism in the final standard. The exposure value iACV(c) (idealized A…
Wolfgang Reitgruber
arXiv · arXiv q-fin · 2014
Consider an equity market with $n$ stocks. The vector of proportions of the total market capitalizations that belong to each stock is called the market weight. The market weight defines the market portfolio which is a buy-and-hold portfolio representing the performance of the entire stock market. Consider a function that assigns a portfolio vector to each possible value of the market weight, and we perform self-finan…
Soumik Pal, Ting-Kam Leonard Wong
arXiv · arXiv q-fin · 2013
Financial portfolio optimization is a widely studied problem in mathematics, statistics, financial and computational literature. It adheres to determining an optimal combination of weights associated with financial assets held in a portfolio. In practice, it faces challenges by virtue of varying math. formulations, parameters, business constraints and complex financial instruments. Empirical nature of data is no long…
Ankit Dangi
arXiv · arXiv q-fin · 2012
We formulate and analyze an inverse problem using derivatives prices to obtain an implied filtering density on volatility's hidden state. Stochastic volatility is the unobserved state in a hidden Markov model (HMM) and can be tracked using Bayesian filtering. However, derivative data can be considered as conditional expectations that are already observed in the market, and which can be used as input to an inverse pro…
Carlos Fuertes, Andrew Papanicolaou
arXiv · arXiv q-fin · 2012
A non-Bayesian time-varying model is developed by introducing the concept of the degree of market efficiency that varies over time. This model may be seen as a reflection of the idea that continuous technological progress alters the trading environment over time. With new methodologies and a new measure of the degree of market efficiency, we examine whether the US stock market evolves over time. In particular, a time…
Mikio Ito, Akihiko Noda, Tatsuma Wada