Gillmore Centre for Financial Technology Seminar

Wednesday 15 December 2021, 14:00 - 15:00 (GMT)

The Adoption of Blockchain-based Decentralized Exchanges with Associate Professor Agostino Capponi.

Abstract: We show that the blockchain order execution mechanism and liquidity pooling create arbitrage rents in decentralized exchanges. The arbitrage rent raises the cost of liquidity provision and imposes negative externalities on users of the underlying blockchain. In equilibrium, automated market makers (AMMs) are adopted by liquidity providers only if exchange rates of token pairs are sufficiently stable. A pricing curve with higher curvature reduces arbitrage rents but also decreases trading activities. We provide statistical support for our main model implications using transaction-level data of AMMs. (joint work with Ruizhe Jia).

With

Agostino Capponi is an Associate Professor of Industrial Engineering and Operations Research at Columbia University. Agostino is a member of the Data Science Institute the Center for the Management of Systemic risk, and the FDT Center for Intelligent Asset Management. He serves as an External Consultant at the U.S. Commodity Futures Trading Commission, Office of the Chief Economist, on topics related to clearinghouse collateral requirements and financial stability.

Agostino's research interests are in networks, systemic risk and financial stability, market microstructure, and financial technology. Agostino maintains collaborations with the main regulatory agencies tasked with risk monitoring and policymaking, including the Department of Treasury's Office of Financial Research, the Commission of Future Trading and Commodities, and the Federal Reserve Board. Agostino's research has been presented at major finance conferences, including the Utah Winter Finance Conference, AFA, EFA, FIRS, Adam Smith Workshop, and the SFS Cavalcade North America Conference.

Agostino's research has been funded by major public agencies and private corporations, including the NSF, DARPA, U.S. Department of Energy, J.P. Morgan, IBM, the Institute for New Economic Thinking, the Global Risk Institute, the Clearpool Group, and the OCP Group.

Agostino is an Editor of Management Science in the Finance Department. He is also a co-editor of Mathematics and Financial Economics, and the financial engineering area editor of Operations Research Letters and of the Institute of Industrial Engineering Transactions. Agostino currently serves as an associate editor of Operations Research, Finance and Stochastics, SIAM Journal on Financial Mathematics, Applied Mathematical Finance, Frontiers of Mathematical Finance, Stochastic Systems, Stochastic Models, and the American Institute of Mathematical Sciences Journal of Dynamics & Games.

He serves as the Chair of the SIAM Activity group in Financial Mathematics and Engineering, and as the President of the INFORMS Finance Section.

Agostino is a recipient of the NSF CAREER Award, the 2019 JP Morgan AI Faculty Research Award, the Columbia-IBM Center for Blockchain & Data Transparency Research Award, a honourable mention from the MIT Center for Finance and Policy and the Harvard Crowd Innovation Laboratory, the Bar-Ilan prize for general research in financial mathematics, and several best paper awards at Fintech Conferences and INFORMS Conferences. He also received a Marie Curie fellowship from the European Commission. Agostino is a fellow of the Crypto and Blockchain Economic Research Forum and an academic fellow of the Luohoan Academy established by Alibaba Group.

Agostino's research has received attention from various media outlets, including Thomson Reuters, the American Banker, Vox, Oxford Business Law, and the Chicago Booth Review. Agostino holds a world patent for a target tracking methodology in military networks.

Agostino received his Master and PhD. Degree in Computer Science and Applied and Computational Mathematics from the California Institute of Technology, respectively in 2006 and 2009. An updated version of his CV is available here.