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Price-Aware Automated Market Makers: Models Beyond Brownian Prices and Static Liquidity

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arxiv 2405.03496 v3 pith:7TXCCWQX submitted 2024-05-06 q-fin.TR

Philippe Bergault , Louis Bertucci , David Bouba , Olivier Guéant , Julien Guilbert This is my paper · ORCID
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keywords modelsautomatedhawkesliquiditymarketpriceprice-awareprocesses
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In this paper, we introduce a suite of models for price-aware automated market making platforms willing to optimize their quotes. These models incorporate advanced price dynamics, including stochastic volatility, jumps, and microstructural price models based on Hawkes processes. Additionally, we address the variability in demand from liquidity takers through models that employ either Hawkes or Markov-modulated Poisson processes. Each model is analyzed with particular emphasis placed on the complexity of the numerical methods required to compute optimal quotes.

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Cited by 6 Pith papers

Reviewed papers in the Pith corpus that reference this work. Sorted by Pith novelty score. Full citation record

  1. Optimal Fees for Liquidity Provision in Automated Market Makers

    q-fin.TR 2025-08 conditional novelty 7.0 of 10

    Optimal AMM fees sit just below all-in CEX trading costs in normal markets, rise with volatility, and become effectively infinite (halt trading) in extreme volatility.

  2. Hawkes-Driven OTC Market Making: Volterra-Riccati Approximation

    q-fin.RM 2026-08 conditional novelty 6.0 of 10

    A Volterra-Riccati approximation lets OTC market makers incorporate Hawkes-type persistence in RFQ flow into quote decisions, tracking the exact solution in exponential benchmarks and producing endogenous long-memory ...

  3. Optimal Dynamic Fees in Automated Market Makers

    q-fin.TR 2025-06 conditional novelty 6.0 of 10

    In a constant-function market maker, optimal dynamic fees balance arbitrage deterrence against noise-trader attraction, and a fee that is linear in inventory and external price is a near-optimal approximation.

  4. High-Frequency Market Manipulation Detection with a Markov-modulated Hawkes process

    stat.ME 2025-02 conditional novelty 6.0 of 10

    The paper develops and estimates a Markov-modulated Hawkes process with piecewise constant decay and uses it to flag extreme trade bursts on a cryptocurrency exchange.

  5. Automated Market Making: the case of Pegged Assets

    q-fin.TR 2024-11 conditional novelty 6.0 of 10

    A new AMM model uses nested Ornstein-Uhlenbeck dynamics with filtering to quote stablecoin and liquid-staking token pairs, and beat geometric Brownian motion-based AMMs in simulation.

  6. Markov approximation for controlled Hawkes Jump-Diffusions with general kernels

    math.PR 2025-07 conditional novelty 5.0 of 10

    Any Hawkes jump-diffusion with an integrable kernel can be approximated arbitrarily well by an augmented Markov jump-diffusion, and optimal control values converge under the same approximation.

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