Quantifying Adverse Selection Costs in Automated Market Makers

Learn to quantify adverse selection costs in automated market makers through this 55-minute lecture by Tim Roughgarden from Columbia University. Explore the economic mechanisms behind AMMs and understand how informed traders can exploit price inefficiencies at the expense of liquidity providers. Examine mathematical frameworks for measuring these costs and analyze their impact on market efficiency. Discover how adverse selection affects different AMM designs and investigate potential mitigation strategies. Gain insights into the trade-offs between providing liquidity and protecting against informed trading in decentralized finance protocols.