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Automated Market-Making for Fiat Currencies

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  • Alex Lipton
  • Artur Sepp

Abstract

We present an automated market-making (AMM) cross-settlement mechanism for digital assets on interoperable blockchains, focusing on central bank digital currencies (CBDCs) and stable coins. We develop an innovative approach for generating fair exchange rates for on-chain assets consistent with traditional off-chain markets. We illustrate the efficacy of our approach on realized FX rates for G-10 currencies.

Suggested Citation

  • Alex Lipton & Artur Sepp, 2021. "Automated Market-Making for Fiat Currencies," Papers 2109.12196, arXiv.org.
    • Handle: RePEc:arx:papers:2109.12196
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    File URL: http://arxiv.org/pdf/2109.12196
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    References listed on IDEAS

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    1. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
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    Cited by:

    1. Maxim Bichuch & Zachary Feinstein, 2022. "Axioms for Automated Market Makers: A Mathematical Framework in FinTech and Decentralized Finance," Papers 2210.01227, arXiv.org, revised Aug 2023.
    2. Hamed Amini & Maxim Bichuch & Zachary Feinstein, 2023. "Decentralized Prediction Markets and Sports Books," Papers 2307.08768, arXiv.org, revised Aug 2023.
    3. Richard Dewey & Craig Newbold, 2023. "The Pricing And Hedging Of Constant Function Market Makers," Papers 2306.11580, arXiv.org.
    4. Philippe Bergault & Louis Bertucci & David Bouba & Olivier Gu'eant, 2022. "Automated Market Makers: Mean-Variance Analysis of LPs Payoffs and Design of Pricing Functions," Papers 2212.00336, arXiv.org, revised Nov 2023.

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