arXiv · arXiv q-fin · 2010
We study the cascading dynamics immediately before and immediately after 219 market shocks. We define the time of a market shock T_{c} to be the time for which the market volatility V(T_{c}) has a peak that exceeds a predetermined threshold. The cascade of high volatility "aftershocks" triggered by the "main shock" is quantitatively similar to earthquakes and solar flares, which have been described by three empirical…
Alexander M. Petersen, Fengzhong Wang, Shlomo Havlin, H. Eugene Stanley
arXiv · arXiv · 2026
This paper evaluates the causal impact of Generative Artificial Intelligence (GenAI) adoption on productivity and systemic risk in the U.S. banking sector. Using a novel dataset linking SEC 10-Q filings to Federal Reserve regulatory data for 809 financial institutions over 2018--2025, we employ two complementary identification strategies: Dynamic Spatial Durbin Models (DSDM) to capture network spillovers and Syntheti…
Tatsuru Kikuchi
arXiv · arXiv · 2008
Labor productivity was studied at the microscopic level in terms of distributions based on individual firm financial data from Japan and the US. A power-law distribution in terms of firms and sector productivity was found in both countries' data. The labor productivities were not equal for nation and sectors, in contrast to the prevailing view in the field of economics. It was found that the low productivity of the J…
Yuichi Ikeda, Wataru Souma
arXiv · arXiv q-fin · 2026
We present SAiFE_gym, a Python module that provides a collection of simulation environments for studying trading problems in Constant Product Markets (CPMs) with Concentrated Liquidity (CL). These markets give Liquidity Providers (LPs) granular control over how their capital is allocated and enable them to adjust their range of liquidity provision dynamically based on market conditions, which in turn, dictates how th…
Georgios Chionas, Charalampos Kleitsikas, Stefanos Leonardos, Leandro Sánchez-Betancourt, Carmine Ventre
arXiv · arXiv q-fin · 2024
In decentralized finance, any individual can pool their assets into an automated market maker (AMM) -- herein we focus on the constant product market maker (CPMM) -- in exchange for a claim on a fraction of future pool assets and fees earned from the market making operations. This position is represented by a liquidity token, whose prevailing on-chain price is effectively the initial deposited assets. Though this pri…
Maxim Bichuch, Zachary Feinstein
arXiv · arXiv q-fin · 2023
Constant product markets with concentrated liquidity (CL) are the most popular type of automated market makers. In this paper, we characterise the continuous-time wealth dynamics of strategic LPs who dynamically adjust their range of liquidity provision in CL pools. Their wealth results from fee income, the value of their holdings in the pool, and rebalancing costs. Next, we derive a self-financing and closed-form op…
Álvaro Cartea, Fayçal Drissi, Marcello Monga
arXiv · arXiv q-fin · 2022
The standard approach for compensating liquidity providers on many decentralized exchanges (DEX) for serving as counter-party to swaps is through charging a small percentage of fees. The expected payoff from the cash flow of this mode of market making has yet to be mathematically formulated in terms of volatility in the existing literature. We provide here a preliminary derivation of the payoff formula, by making the…
Jin Hong Kuan
arXiv · arXiv q-fin · 2021
Uniswap is a decentralized exchange (DEX) and was first launched on November 2, 2018 on the Ethereum mainnet [1] and is part of an Ecosystem of products in Decentralized Finance (DeFi). It replaces a traditional order book type of trading common on centralized exchanges (CEX) with a deterministic model that swaps currencies (or tokens/assets) along a fixed price function determined by the amount of currencies supplie…
Andreas A. Aigner, Gurvinder Dhaliwal
arXiv · arXiv q-fin · 2026
A physically backed leveraged event position requires real credit: if collateral C receives leverage L, the protocol supplies (L-1)C and uses the combined amount to acquire recognized event exposure. This paper develops a venue-agnostic on-chain credit architecture for that capital layer and an endogenous model of its capital market. It separates traders, Senior Credit LPs, market makers, liquidators, and Liquidation…
Maksym Nechepurenko
arXiv · arXiv q-fin · 2024
Automated market makers (AMMs) are a new type of trading venues which are revolutionising the way market participants interact. At present, the majority of AMMs are constant function market makers (CFMMs) where a deterministic trading function determines how markets are cleared. Within CFMMs, we focus on constant product market makers (CPMMs) which implements the concentrated liquidity (CL) feature. In this thesis we…
Marcello Monga
arXiv · arXiv q-fin · 2023
Automated market makers (AMMs) are a new prototype of decentralised exchanges which are revolutionising market interactions. The majority of AMMs are constant product markets (CPMs) where exchange rates are set by a trading function. This work studies optimal trading and statistical arbitrage in CPMs where balancing exchange rate risk and execution costs is key. Empirical evidence shows that execution costs are accur…
Álvaro Cartea, Fayçal Drissi, Marcello Monga
arXiv · arXiv q-fin · 2021
Automated market makers (AMM) have grown to obtain significant market share within the cryptocurrency ecosystem, resulting in a proliferation of new products pursuing exotic strategies for horizontal differentiation. Yet, their theoretical properties are curiously homogeneous when a set of basic assumptions are met. In this paper, we start by presenting a universal approach to deriving a formula for liquidity provisi…
Johannes Rude Jensen, Mohsen Pourpouneh, Kurt Nielsen, Omri Ross
arXiv · arXiv q-fin · 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
OpenAlex · Journal of Applied Econometrics · 2007 · cites 12575
Abstract A number of panel unit root tests that allow for cross‐section dependence have been proposed in the literature that use orthogonalization type procedures to asymptotically eliminate the cross‐dependence of the series before standard panel unit root tests are applied to the transformed series. In this paper we propose a simple alternative where the standard augmented Dickey–Fuller (ADF) regressions are augmen…
M. Hashem Pesaran
arXiv · arXiv q-fin · 2026
Leverage does not create manipulation or informed trading in event markets, but it changes their economics. We separate four conduct channels: market-price manipulation, real-world outcome manipulation, resolution-process manipulation, and informed trading that exploits non-public information without changing the event or resolution rule. A capital-constrained amplification model shows that gross directional gains sc…
Maksym Nechepurenko
arXiv · arXiv q-fin · 2020
This chapter presents a history of international trade finance - the oldest domain of international finance - from its emergence in the Middle Ages up to today. We describe how the structure and governance of the global trade finance market changed over time and how trade credit instruments evolved. Trade finance products initially consisted of idiosyncratic assets issued by local merchants and bankers. The financing…
Olivier Accominotti, Stefano Ugolini
arXiv · arXiv q-fin · 2012
Regarding the intraday sequence of high frequency returns of the S&P index as daily realizations of a given stochastic process, we first demonstrate that the scaling properties of the aggregated return distribution can be employed to define a martingale stochastic model which consistently replicates conditioned expectations of the S&P 500 high frequency data in the morning of each trading day. Then, a more general fo…
Fulvio Baldovin, Francesco Camana, Massimiliano Caporin, Michele Caraglio, Attilio L. Stella