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SIAM Activity Group on FME Virtual Talk Series
Join us for a series of online talks on topics related to mathematical finance and engineering and running every two weeks until further notice. The series is organized by the SIAM Activity Group on Financial Mathematics and Engineering.

Date: Thursday, September 8, 2022, 1PM

Speaker: Agostino Capponi, Columbia University

Title: The Adoption of Blockchain-Based Decentralized Exchanges

Abstract: : Decentralized finance (DeFi) is a competitive marketplace of decentralized financial applications that operate through smart contracts, which currently manages over $57 billion USD. We investigate the market microstructure of Automated Market Makers (AMMs), the most prominent type of pricing functions implemented by DeFi exchanges, and highlight the fundamental differences with centralized limit order books. Through a dynamic game theoretical model we demonstrate that, in equilibrium, arbitrageurs extract gains from liquidity providers for a broad class of convex, twice differentiable, and positively homogeneous pricing functions. We show that pricing curves with higher convexity result in higher price impact, which reduces arbitrage and liquidity freezes, but also decreases trading volume. We provide statistical support for our model implications using transaction-level data of Uniswap and SushiSwap AMMs (joint work with R. Jia).
Oct 13, 2022 01:00 PM
Nov 10, 2022 01:00 PM
Dec 8, 2022 01:00 PM
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Speakers

Agostino Cappponi
@Columbia University
Agostino Capponi is an Associate Professor in the IEOR Department at Columbia University. His research interests are in financial technology, market microstructure, systemic risk, and economic networks. Agostino's research has been funded by major agencies such as NSF, DARPA, DOE, IBM, Ripple, and Ethereum. Agostino's research has been recognized with the 2018 NSF CAREER award, and a JP Morgan AI Research Faculty award. He is a fellow of the crypto economics and blockchain research forum, and an academic fellow of Alibaba's Luohan academy. He serves as a Finance Department co-editor of Management Science and as the area editor of Operations Research Letters. He also serves as an associate editor of major journals in his field such as SIFIN, Finance and Stochastics, Stochastic Systems, and Operations Research. Agostino is the former Chair of the SIAG/FME Activity Group, and the founding director of the Columbia Center for Digital Finance and Technologies.