Execution Risk

Second Thoughts: How 1-second subslots transform CEX-DEX Arbitrage on Ethereum ArXiv ID: 2601.00738 “View on arXiv” Authors: Aleksei Adadurov, Sergey Barseghyan, Anton Chtepine, Antero Eloranta, Andrei Sebyakin, Arsenii Valitov Abstract This paper examines the impact of reducing Ethereum slot time on decentralized exchange activity, with a focus on CEX-DEX arbitrage behavior. We develop a trading model where the agent’s DEX transaction is not guaranteed to land, and the agent explicitly accounts for this execution risk when deciding whether to pursue arbitrage opportunities. We compare agent behavior under Ethereum’s default 12-second slot time environment with a faster regime that offers 1-second subslot execution. The simulations, calibrated to Binance and Uniswap v3 data from July to September 2025, show that faster slot times increase arbitrage transaction count by 535% and trading volume by 203% on average. The increase in CEX-DEX arbitrage activity under 1-second subslots is driven by the reduction in variance of both successful and failed trade outcomes, increasing the risk-adjusted returns and making CEX-DEX arbitrage more appealing. ...

Event-Time Anchor Selection for Multi-Contract Quoting ArXiv ID: 2507.05749 “View on arXiv” Authors: Aditya Nittur Anantha, Shashi Jain, Shivam Goyal, Dhruv Misra Abstract When quoting across multiple contracts, the sequence of execution can be a key driver of implementation shortfall relative to the target spread~\cite{“bergault2022multi”}. We model the short-horizon execution risk from such quoting as variations in transaction prices between the initiation of the first leg and the completion of the position. Our quoting policy anchors the spread by designating one contract ex ante as a \emph{“reference contract”}. Reducing execution risk requires a predictive criterion for selecting that contract whose price is most stable over the execution interval. This paper develops a diagnostic framework for reference-contract selection that evaluates this stability by contrasting order-flow Hawkes forecasts with a Composite Liquidity Factor (CLF) of instantaneous limit order book (LOB) shape. We illustrate the framework on tick-by-tick data for a pair of NIFTY futures contracts. The results suggest that event-history and LOB-state signals offer complementary views of short-horizon execution risk for reference-contract selection. ...

The Market Maker’s Dilemma: Navigating the Fill Probability vs. Post-Fill Returns Trade-Off ArXiv ID: 2502.18625 “View on arXiv” Authors: Unknown Abstract Using data from a live trading experiment on the Binance Bitcoin perpetual, we examine the effects of (i) basic order book mechanics and (ii) the persistence of price changes from immediate to short timescales, revealing the interplay between returns, queue sizes, and orders’ queue positions. We document a fundamental trade-off: a negative correlation between maker fill likelihood and post-fill returns. This dictates that viable maker strategies often require a contrarian approach, counter-trading the prevailing order book imbalance. These dynamics render commonly-cited strategies highly unprofitable, leading us to model `Reversals’: situations where a contrarian maker strategy at the touch proves effective. ...