Imperial College London
Alternate

ProfessorWilliamKnottenbelt

Faculty of Engineering, Department of Computing

Professor of Applied Quantitative Analysis
 
 
 
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Contact

 

+44 (0)20 7594 8331w.knottenbelt Website

 
 
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Location

 

E363ACE ExtensionSouth Kensington Campus

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Summary

 

Publications

Citation

BibTex format

@inproceedings{Gudgeon:2020:10.1145/3419614.3423254,
author = {Gudgeon, L and Werner, S and Perez, Hernandez D and Knottenbelt, W},
doi = {10.1145/3419614.3423254},
pages = {92--112},
publisher = {ACM},
title = {DeFi protocols for loanable funds: interest rates, liquidity and market efficiency},
url = {http://dx.doi.org/10.1145/3419614.3423254},
year = {2020}
}
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RIS format (EndNote, RefMan)

TY  - CPAPER
AB  - We coin the term Protocols for Loanable Funds (PLFs)to refer to pro-tocols which establish distributed ledger-based markets for loanable funds. PLFs are emerging as one of the main applications within De-centralized Finance (DeFi), and use smart contract code to facilitate the intermediation of loanable funds. In doing so, these protocols allow agents to borrow and save programmatically. Within these protocols, interest rate mechanisms seek to equilibrate the supply and demand for funds. In this paper, we review the methodologies used to set interest rates on three prominent DeFi PLFs, namely Compound, Aave and dYdX. We provide an empirical examination of how these interest rate rules have behaved since their inception in response to differing degrees of liquidity. We then investigate the market efficiency and inter-connectedness between multiple protocols, examining first whether Uncovered Interest Parity holds within a particular protocol and second whether the interest rates for a particular token market show dependence across protocols,developing a Vector Error Correction Model for the dynamics.
AU  - Gudgeon,L
AU  - Werner,S
AU  - Perez,Hernandez D
AU  - Knottenbelt,W
DO  - 10.1145/3419614.3423254
EP  - 112
PB  - ACM
PY  - 2020///
SP  - 92
TI  - DeFi protocols for loanable funds: interest rates, liquidity and market efficiency
UR  - http://dx.doi.org/10.1145/3419614.3423254
UR  - https://dl.acm.org/doi/abs/10.1145/3419614.3423254
UR  - http://hdl.handle.net/10044/1/82240
ER  -
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