Optimal Liquidity Provision
A small investor provides liquidity at the best bid and ask prices of a limit order market. For small spreads and frequent orders of other market participants, we explicitly determine the investor's optimal policy and welfare. In doing so, we allow for general dynamics of the mid price, the spread, and the order flow, as well as for arbitrary preferences of the liquidity provider under consideration.
Code (0)
등록된 구현이 없습니다.
Similar Papers 제목 키워드 기반
Automated Market Makers: A Stochastic Optimization Approach for Profitable Liquidity Concentration
Concentrated liquidity automated market makers (AMMs), such as Uniswap v3, enable liquidity providers (LPs) to earn liquidity rewards by depositing tokens into liquidity pools. However, LPs often face significant financi…
Stochastic OptimizationLiquidity provision of utility indifference type in decentralized exchanges
We present a mathematical formulation of liquidity provision in decentralized exchanges. We focus on constant function market makers of utility indifference type, which include constant product market makers with concent…
Decentralised Finance and Automated Market Making: Predictable Loss and Optimal Liquidity Provision
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 t…
Automated Market Making and Decentralized Finance
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 determi…
Automated Market Makers: Toward More Profitable Liquidity Provisioning Strategies
To trade tokens in cryptoeconomic systems, automated market makers (AMMs) typically rely on liquidity providers (LPs) that deposit tokens in exchange for rewards. To profit from such rewards, LPs must use effective liqui…
Position