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Do Automated Market Makers In Defi Ecosystem Exhibit Time-Varying Connectedness During Stressed Events?, Bikramaditya Ghosh, Hayfa Kazouz, Zaghum Umar
Do Automated Market Makers In Defi Ecosystem Exhibit Time-Varying Connectedness During Stressed Events?, Bikramaditya Ghosh, Hayfa Kazouz, Zaghum Umar
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We investigate the connectedness of automated market makers (AMM) that play a pivotal role in liquidity and ease of operations in the decentralized exchange (DEX). By applying the TVP-VAR model, our findings show higher level of connectivity during periods of turmoil (such as Delta, Omicron variants of SARS-Covid, and the Russia Ukraine conflict). Furthermore, risk transmission/reception is found to be independent of the platform on which they typically run (Ethereum based AMMs were both emitters as well as receivers). Pancake (a Binance based AMM) and Perpetual Protocol (Ethereum based AMM) emerged as moderate to high receivers of risk transmission, whereas …