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Impact of Volatility on Time-Based Transaction Ordering Policies

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  • Sunghun Ko
  • Jinsuk Park

Abstract

We study Arbitrum's Express Lane Auction (ELA), an ahead-of-time second-price auction that grants the winner an exclusive latency advantage for one minute. Building on a single-round model with risk-averse bidders, we propose a hypothesis that the value of priority access is discounted relative to risk-neutral valuation due to the difficulty of forecasting short-horizon volatility and bidders' risk aversion. We test these predictions using ELA bid records matched to high-frequency ETH prices and find that the result is consistent with the model.

Suggested Citation

  • Sunghun Ko & Jinsuk Park, 2025. "Impact of Volatility on Time-Based Transaction Ordering Policies," Papers 2512.23386, arXiv.org.
    • Handle: RePEc:arx:papers:2512.23386
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    References listed on IDEAS

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