Decentralised Finance and Automated Market Making: Execution and Speculation

Automated market makers (AMMs) are a new prototype of trading venues which revolutionising the way participants interact. At present, majority AMMs constant function (CFMMs) where deterministic determines how markets cleared. A distinctive characteristic CFMMs is that execution costs given by closed-form price, liquidity, and transaction size. This gives rise to class problems. We focus on product show optimally trade large position in an asset execute statistical arbitrages based signals. employ stochastic optimal control tools devise two strategies. One strategy dynamics prices competing assumes liquidity AMM. The other AMM efficient stochastic. use Uniswap v3 data study cost dynamics, motivate models. Finally, we perform consecutive runs in-sample estimation model parameters out-of-sample liquidation arbitrage strategies showcase performance