Slippage

Shortermism and excessive risk taking in optimal execution with a target performance ArXiv ID: 2505.15611 “View on arXiv” Authors: Emilio Barucci, Yuheng Lan Abstract We deal with the optimal execution problem when the broker’s goal is to reach a performance barrier avoiding a downside barrier. The performance is provided by the wealth accumulated by trading in the market, the shares detained by the broker evaluated at the market price plus a slippage cost yielding a quadratic inventory cost. Over a short horizon, this type of remuneration leads, at the same time, to a more aggressive and less risky strategy compared to the classical one, and over a long horizon the performance turns to be poorer and more dispersed. ...

QubitSwap: The Informational Edge in Decentralised Exchanges ArXiv ID: 2504.06281 “View on arXiv” Authors: Unknown Abstract Decentralised exchanges (DEXs) have transformed trading by enabling trustless, permissionless transactions, yet they face significant challenges such as impermanent loss and slippage, which undermine profitability for liquidity providers and traders. In this paper, we introduce QubitSwap, an innovative DEX model designed to tackle these issues through a hybrid approach that integrates an external oracle price with internal pool dynamics. This is achieved via a parameter $z$, which governs the balance between these price sources, creating a flexible and adaptive pricing mechanism. Through rigorous mathematical analysis, we derive a novel reserve function and pricing model that substantially reduces impermanent loss and slippage compared to traditional DEX frameworks. Notably, our results show that as $z$ approaches 1, slippage approaches zero, enhancing trading stability. QubitSwap marks a novel approach in DEX design, delivering a more efficient and resilient platform. This work not only advances the theoretical foundations of decentralised finance but also provides actionable solutions for the broader DeFi ecosystem. ...

To Trade Or Not To Trade: Cascading Waterfall Round Robin Rebalancing Mechanism for Cryptocurrencies ArXiv ID: 2407.12150 “View on arXiv” Authors: Unknown Abstract We have designed an innovative portfolio rebalancing mechanism termed the Cascading Waterfall Round Robin Mechanism. This algorithmic approach recommends an ideal size and number of trades for each asset during the periodic rebalancing process, factoring in the gas fee and slippage. The essence of the model we have created gives indications regarding whether trades should be made on individual assets depending on the uncertainty in the micro - asset level characteristics - and macro - aggregate market factors - environments. In the hyper-volatile crypto market, our approach to daily rebalancing will benefit from volatility. Price movements will cause our algorithm to buy assets that drop in prices and sell as they soar. In fact, the buying and selling happen only when certain boundaries are crossed in order to weed out any market noise and ensure sound trade execution. We have provided several numerical examples to illustrate the steps - including the calculation of several intermediate variables - of our rebalancing mechanism. The Algorithm we have developed can be easily applied outside blockchain to investment funds across all asset classes at any trading frequency and rebalancing duration. Shakespeare As A Crypto Trader: To Trade Or Not To Trade, that is the Question, Whether an Optimizer can Yield the Answer, Against the Spikes and Crashes of Markets Gone Wild, To Quench One’s Thirst before Liquidity Runs Dry, Or Wait till the Tide of Momentum turns Mild. ...

UAMM: Price-oracle based Automated Market Maker ArXiv ID: 2308.06375 “View on arXiv” Authors: Unknown Abstract Automated market makers (AMMs) are pricing mechanisms utilized by decentralized exchanges (DEX). Traditional AMM approaches are constrained by pricing solely based on their own liquidity pool, without consideration of external markets or risk management for liquidity providers. In this paper, we propose a new approach known as UBET AMM (UAMM), which calculates prices by considering external market prices and the impermanent loss of the liquidity pool. Despite relying on external market prices, our method maintains the desired properties of a constant product curve when computing slippages. The key element of UAMM is determining the appropriate slippage amount based on the desired target balance, which encourages the liquidity pool to minimize impermanent loss. We demonstrate that our approach eliminates arbitrage opportunities when external market prices are efficient. ...