The first part of the thesis deals with arbitrage in the crypto market, something that has not been researched much before. Why did you choose that research question?
– My interest in blockchain technology has been longstanding. When financial trading began on general blockchains such as Ethereum, I recognized a unique opportunity for research in the realm of financial economics. Given the vital role that arbitrage plays in correcting prices, it was a logical starting point for understanding these cryptocurrency markets. This paper delves into the intricacies of how arbitrage is conducted on decentralized exchanges and reveals that most profits are captured by a relatively small, yet expert, group of arbitrageurs.
When financial trading began on general blockchains such as Ethereum, I recognized a unique opportunity for research in the realm of financial economics
The second part, Price Discovery in Constant Product Markets, also touches on the cryptocurrency market. What is it about crypto that interests you?
– The full potential of blockchain technology and its future applications remain largely unexplored. However, decentralized finance, wherein financial transactions are processed on the blockchain, emerges as a promising prospect. My curiosity lies in understanding this technology and its potential to improve our financial system. This paper illuminates the process of price discovery in markets that employ algorithms for price revisions (automated market making), contrasting the traditional agent market making model. I derive an equation within this paper that directly maps order flow (trading) to exact price changes. The empirical portion of this work examines how regular trading, algorithmic trading, and adversarial trading (arbitrageurs) contribute to price formation in these markets.
The full potential of blockchain technology and its future applications remain largely unexplored.
In part three, you examine the rhetoric of various central banks. Was there anything in the results that surprised you?
– Central bank communication has traditionally aimed at transmitting private information to the public and aligning financial market expectations. What struck me the most, however, was the diverse range of subjects addressed by central banks. The use of natural language processing to quantify this communication reveals that not all the topics are directly linked to conventional monetary policy. Furthermore, the topics' trends over time cannot be straightforwardly explained by the underlying economic landscape. While this paper doesn't set out to decipher these trends, it is plausible to consider that certain topics might be influenced by prevailing economic narratives.
What struck me the most was the diverse range of subjects addressed by central banks.
Your PhD defense is on Thursday, how does it feel?
– There's a mix of anticipation and nerves as I approach the defense of my thesis, but there's also a sense of eagerness to progress to the next phase of my career.. After the defense, presuming all goes well, I will celebrate this milestone with a small gathering of family and friends.
