Static replication of impermanent loss for concentrated liquidity provision in decentralised markets

Strategic Liquidity Provision in Limit Order Markets

Ineffi cient Liquidity Provision

We prove that in competitive market economies with no insurance for idiosyncratic risks, agents will always overinvest in illiquid long term assets and underinvest in short term liquid assets. We take as our setting the seminal model of Diamond and Dybvig (1983), who first posed the question in a tractable model. We reach such a simple conclusion under mild conditions because we stick to the ba...

Robust Reputation in Decentralised Markets

Establishing cooperation and protecting individuals from selfish or malicious behaviour are key goals in open multi-agent systems. Incomplete information regarding potential interaction partners can undermine mechanisms such as trust and reputation, particularly in lightweight systems designed for individuals with significant resource constraints. In this paper, we (i) propose extending low cos...

Liquidity in Frictional Asset Markets

Asymmetric Information and Liquidity Provision

The presence of information asymmetry increases the probability that a potential predator will provide liquidity rather than engaging in predatory trading during liquidation by a distressed trader. More information asymmetry is associated with lower expected losses from liquidation for the distressed trader in illiquid markets. There is a negative correlation between the degree of information a...