Apr 2024-

Math-Fi seminar on 19 Sep.

2024.09.18 Wed up
Date: 19th September (Thu)
Place: West Wing, 6th floor, Colloquium Room and on the Web (zoom)
Time: 16:30–18:00

Speaker: Taiho Wang (Baruch College) 

Title:  Growth rate of wealth in G3Ms 

Abstract:
Geometric mean market makers (G3Ms), such as Uniswap and Balancer, represent a widely used class of automated market makers (AMMs). These G3Ms are characterized by the following rule: the reserves of the AMM must maintain the same (weighted) geometric mean before and after each trade. In this talk, we investigate the effects of trading fees on liquidity providers’ (LP) profitability in a G3M, as well as the adverse selection faced by LPs due to arbitrage activities involving a reference market. Our work expands previous models to G3Ms, integrating both transaction fees and continuous-time arbitrage into the analysis. Within this context, we analyze G3M dynamics, characterized by stochastic storage processes, and calculate the growth rate of LP wealth. We extend earlier results on constant product market maker, commonly referred to as Uniswap v2, as a special case. The talk is based on a joint work with Cheuk Yin Lee and Shen-Ning Tung.

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