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

Author

Listed:
  • Philippe Bergault

    (Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres)

  • Louis Bertucci

    (Institut Louis Bachelier)

  • David Bouba

    (Swaap Labs)

  • Olivier Guéant

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • Julien Guilbert

    (Swaap Labs)

Abstract

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.

Suggested Citation

  • Philippe Bergault & Louis Bertucci & David Bouba & Olivier Guéant & Julien Guilbert, 2024. "Price-Aware Automated Market Makers: Models Beyond Brownian Prices and Static Liquidity," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-04577060, HAL.
    • Handle: RePEc:hal:cesptp:hal-04577060
    as

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