Showing 1 - 10 of 31
We consider a single security market based on a limit order book and two investors, with different speeds of trade execution. If the fast investor can front-run the slower investor, we show that this allows the fast trader to obtain risk free profits, but that these profits cannot be scaled. We...
Persistent link: https://www.econbiz.de/10009325487
We study (backward) stochastic differential equations with noise coming from a finite state Markov chain. We show that, for the solutions of these equations to be `Markovian', in the sense that they are deterministic functions of the state of the underlying chain, the integrand must be of a...
Persistent link: https://www.econbiz.de/10009372128
We consider a single security market based on a limit order book and two investors, with different speeds of trade execution. If the fast investor can front-run the slower investor, we show that this allows the fast trader to obtain risk free profits, but that these profits cannot be scaled. We...
Persistent link: https://www.econbiz.de/10013119313
Persistent link: https://www.econbiz.de/10009624627
We investigate whether the fee income from trades on the CFM is sufficient for the liquidity providers to hedge away the exposure to market risk. We first analyse this problem through the lens of continuous-time financial mathematics and derive an upper bound for not-arbitrage fee income that...
Persistent link: https://www.econbiz.de/10014265345
We present a holistic framework for risk and reward management for decentralised lending protocols, such as AAVE or Compound. This framework highlights tensions and trade-offs in protocol design and the choice of various risks and incentives parameters.Using this, we identify the fundamental...
Persistent link: https://www.econbiz.de/10014349179
Persistent link: https://www.econbiz.de/10012272365
In this paper we look at ergodic BSDEs in the case where the forward dynamics are given by the solution to a non-autonomous (time-periodic coefficients) Ornstein-Uhlenbeck SDE with L\'evy noise, taking values in a separable Hilbert space. We establish the existence of a unique bounded solution...
Persistent link: https://www.econbiz.de/10010784801
We consider filtration consistent nonlinear expectations in probability spaces satisfying only the usual conditions and separability. Under a domination assumption, we demonstrate that these nonlinear expectations can be expressed as the solutions to Backward Stochastic Differential Equations...
Persistent link: https://www.econbiz.de/10010577837
Most previous contributions to BSDEs, and the related theories of nonlinear expectation and dynamic risk measures, have been in the framework of continuous time diffusions or jump diffusions. Using solutions of BSDEs on spaces related to finite state, continuous time Markov chains, we develop a...
Persistent link: https://www.econbiz.de/10005083493