Research
45d agoNew Framework For Perpetual Futures Market Making
A new theoretical framework models market making in perpetual futures as a stochastic optimal control problem. The researchers use CARA utility and a Hamilton-Jacobi-Bellman equation to optimize bid-ask spreads and inventory hedging. This provides a PnL decomposition theorem to isolate adverse selection loss.
The Signal
It offers a mathematical blueprint for high-yield liquidity provision.