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RMMS simulations

This project is intended to investigate the replication of payoffs using custom Constant Function Market Makers (CFMMs) in the spirit of the 2021 paper from Angeris, Evans and Chitra. For now it only focuses on the Covered Call replication. The project is organized as follows:

modules contains all the simulation toolkit. In particular:

• modules/arb.py implements the optimal arbitrage logic.
• modules/cfmm.py implements the actual CFMM pool logic.
• modules/utils.py contains a number of utility functions (math, geometric brownian motion generation).
• modules/simulate.py is simply the function used to run an individual simulation.
• modules/optimize_fee.py contains the logic required to find the optimal fee given some market and pool parameters.

simulation.py is a script used to run individual simulations whose parameters are specified in the config.ini file.

optimal_fees_parallel.py is a script to run an actual fee optimization routine for a prescribed parameter space (to be specified within the script itself).

optimal_fees_visualization.py is a script that generates a visual representation of the output of a fee optimization routine.

error_distribution.py is a script to plot the distribution of errors given some market and pool parameters for different fee regimes.

All the different functions and design choices are documented in a separate document.

Requirements

pip install numpy, pip install scipy, pip install matplotlib, pip install joblib