From Means to Medians: Optimal Benchmark Design

Angel Hernando-Veciana

Papers from arXiv.org

Abstract: Manipulation of price benchmarks has cost hundreds of millions of dollars, making manipulation-resistant design a first-order question. A puzzling empirical pattern offers a starting point: benchmarks in traditional finance are typically means, those in decentralised finance medians. I rationalise this divide with a variable cost rising in each price distortion's size and a fixed cost per manipulated price. The optimal benchmark is a mean when fixed costs are negligible and variable costs convex, a median when variable costs are negligible, and otherwise a trimmed mean, with weights reflecting cost heterogeneity.

Date: 2025-06, Revised 2026-06
New Economics Papers: this item is included in nep-cta
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
http://arxiv.org/pdf/2506.22142 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2506.22142

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().