We study how high-frequency traders (HFTs) strategically decide their speed level in a market with a random speed bump. If HFTs recognize the market impact of their speed decision, they perceive a wider bid-ask spread as an endogenous upward-sloping cost of being faster. We find that the speed...

We study how high-frequency traders (HFTs) strategically decide their speed level in a market with a random speed bump. If HFTs recognize the market impact of their speed decision, they perceive a wider bid-ask spread as an endogenous upward-sloping cost of being faster. We find that the speed...

We study how high-frequency traders (HFTs) strategically decide their speed level in a market with a random speed bump. If HFTs recognize the market impact of their speed decision, they perceive a wider bid-ask spread as an endogenous upward-sloping cost of being faster. We find that the speed...

This paper provides the model of self-organized stock market crashes with overshooting. Unlike typical macroeconomic and finance models, an economy can experience a boom and bust without any aggregate exogenous shocks nor successive idiosyncratic shocks. Under the boom, the economy spontaneously...

A growing number of blockchain-based decentralized exchanges have adopted automated market makers to attract liquidity, and they replace the traditional order book system for trade execution. This paper studies the equilibrium liquidity provision via constant product market makers, one of the...

This paper firstly pursues the fundamental price of Bitcoin in the general equilibrium framework and its empirical characteristics. Our theoretical model predicts that (i) the Bitcoin price and the total hash rate are determined simultaneously in the long-run and (ii) the hash rate of Bitcoin...

A speed bump in financial markets is an intentional delay imposed on trade execution. Its primary purpose is to mitigate asymmetric information by slowing down high-frequency traders (HFTs). In contrast to its intended purpose, this paper shows that a speed bump has the crowding-in effect on...

This paper studies how decentralized information management affects asset quality uncertainty and consumer welfare. We show that quality certification improves transparency but has a non-monotonic impact on trading activity and the fee for certification. Thus, when a single agent serves as a...

This paper studies a simple model with information and business cycles to explain an endogenous bust. In such a cycle, a booming economy experiences a bust despite the absence of an exogenous trigger shock; instead, increasing economic activity in a boom state itself causes a crash. The key is a...

Automated market makers (AMMs) are algorithms that pool liquidity and make it available to liquidity takers by automatically and algorithmically determining an execution price of a trade. In the recent markets for digital assets, a growing number of blockchain-based decentralized exchanges (DEX)...