The following post focuses on using performance data to evaluate the quality of a trader or investment manager. To be sure, qualitative assessments are also valuable but are not considered here explicitly. The Sharpe Ratio The most commonly used tool to judge traders (and hedge funds) is the Sharpe Ratio (SR), defined as…

Portfolio optimization strategies typically involve an unintuitive procedure that combines individual assets’ expected returns, individual assets’ risks (i.e., standard deviations of expected returns), and the correlations amongst all assets to determine an optimal portfolio. The following post explores a simple heuristic that greatly simplifies the standard portfolio optimization algorithm: the…

In a previous post, I introduced a new term called the impermanent loss rate, which measures the cost per annum of delta hedging a liquidity pool due to its embedded optionality. In another post, I outlined the history of Uniswap and summarized the key formulas that characterize its AMM design…

Last September, the Wall Journal Journal reported that the SEC started investigating Uniswap for violation of securities regulations. Since then, Gary Gensler at the SEC has repeatedly called for more regulation of cryptocurrencies, even suggestively stating that an outright ban is “up to Congress”. Meanwhile, in the crypto world, the…

An automated market maker (AMM) is an algorithmic method for price discovery in a given market. This contrasts with the order book model used by traditional market makers. Central to the story of AMMs on public blockchains is Uniswap, which is the most successful AMM by TVL/volume and has inspired…

This post is a tale of two stories. The first is a story about how antiquated technology and regulations give a small cabal of Wall Street hedge fund managers enormous wealth and power. The second is a story about the invisible taxes buried deep in the mortgage creation process that…

Lee Reiners of Duke Law recently wrote an op-ed for the Wall Street Journal where he states, “I have yet to identify a single task or process that crypto makes easier, better, cheaper or faster”. …

In the following post, I look at the recent hack on Uranium Finance (Binance Smart Chain), identify points of failure and make suggestions for performing adequate due diligence in the context of making investments in DeFi smart contracts. Early April 28th (UTC), the Uranium Finance liquidity pools were drained. As…

The Curve Whitepaper concisely highlights an approach to building an AMM that allows developers to control slippage. Curve’s primary use case is swapping stablecoins, where low slippage is essential to compete with centralized exchanges. In contrast, Uniswap and Balancer use a constant-product invariant (as the Curve Whitepaper describes it); on…