Configurable arbitrage and slippage in automated market making systems

Scott Condie

Finance Research Letters, 2025, vol. 83, issue C

Abstract: This paper studies the constant elasticity pricing function, a generalization of the typical constant product pricing function used in automated market making exchanges like Uniswap. This generalization allows for oracle-based, arbitrage-free pricing, as well as configurable liquidity. Each of these possibilities come with trade-offs that are discussed, including the competitive environments in which this increased flexibility is desirable.

Keywords: Automated market making; Liquidity; Slippage; Uniswap; Market microstructure (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:83:y:2025:i:c:s1544612325008748

DOI: 10.1016/j.frl.2025.107615

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