A Theoretical Approach to Stablecoin Design via Price Windows

• URL: http://arxiv.org/abs/2602.15981v1
• Date: Tue, 17 Feb 2026 20:17:51 GMT
• Title: A Theoretical Approach to Stablecoin Design via Price Windows
• Authors: Katherine Molinet, Aris Filos-Ratsikas,
• Abstract summary: We show that price window designs cannot achieve both short- and long-term stability unless they are backed by already-stable reserves.<n>In the latter case, the market price of the stablecoin inherits the volatility of its backing asset, with fluctuations that can be proportional to the backing asset's own volatility.
• Score: 6.342680065845027
• License: http://creativecommons.org/licenses/by/4.0/
• Abstract: In this paper, we explore the short- and long-term stability of backed stablecoins offering constant mint and redeem prices to all agents. We refer to such designs as price window-based, since the mint and redeem prices constrain the stablecoin's market equilibrium. We show that, without secondary stabilization mechanisms, price window designs cannot achieve both short- and long-term stability unless they are backed by already-stable reserves. In particular, the mechanism faces a tradeoff: either risk eventual reserve depletion through persistent arbitrage by a speculator, or widen the distance between mint and redeem prices enough to disincentivize arbitrage. In the latter case, however, the market price of the stablecoin inherits the volatility of its backing asset, with fluctuations that can be proportional to the backing asset's own volatility.

Related papers

• Robust Reinforcement Learning in Finance: Modeling Market Impact with Elliptic Uncertainty Sets [57.179679246370114]
  In financial applications, reinforcement learning (RL) agents are commonly trained on historical data, where their actions do not influence prices.<n>During deployment, these agents trade in live markets where their own transactions can shift asset prices, a phenomenon known as market impact.<n>Traditional robust RL approaches address this model misspecification by optimizing the worst-case performance over a set of uncertainties.<n>We develop a novel class of elliptic uncertainty sets, enabling efficient and tractable robust policy evaluation.
  arXiv  Detail & Related papers  (2025-10-22T18:22:25Z)
• A Game-Theoretic Foundation for Bitcoin's Price: A Security-Utility Equilibrium [7.218736319024516]
  This paper introduces a structural game-theoretic model to value decentralized digital assets like Bitcoin.<n>It frames the asset's price within a Rational-Expectations Security-Utility Nash Equilibrium (RESUNE)<n>We prove the existence of a RESUNE and offer conditions for its uniqueness and stability.
  arXiv  Detail & Related papers  (2025-08-08T07:09:21Z)
• SoK: Stablecoin Designs, Risks, and the Stablecoin LEGO [21.776152872113922]
  This SoK confronts this gap through a large-scale analysis of 157 research studies, 95 active stablecoins, and 44 major security incidents.<n>Our analysis establishes four pivotal insights: 1) stability is best understood not an inherent property but an emergent, fragile state reliant on the interplay between market confidence and continuous liquidity.<n>We introduce the Stablecoin LEGO framework, a quantitative methodology mapping historical failures to current designs.
  arXiv  Detail & Related papers  (2025-06-21T07:19:42Z)
• Unveiling the Mechanisms of DAI: A Logic-Based Approach to Stablecoin Analysis [1.53744306569115]
  This paper focuses on the DAI stablecoin, which combines crypto-collateralization and algorithmic mechanisms.<n>We propose a formal logic-based framework for representing the policies and operations of DAI, implemented in Prolog and released as open-source software.
  arXiv  Detail & Related papers  (2024-12-20T11:43:51Z)
• TimeBridge: Non-Stationarity Matters for Long-term Time Series Forecasting [49.6208017412376]
  TimeBridge is a novel framework designed to bridge the gap between non-stationarity and dependency modeling.<n>TimeBridge consistently achieves state-of-the-art performance in both short-term and long-term forecasting.
  arXiv  Detail & Related papers  (2024-10-06T10:41:03Z)
• Collateral Portfolio Optimization in Crypto-Backed Stablecoins [0.46664938579243576]
  In crypto-backed stablecoins, the peg is founded on the guarantee that in case of system shutdown, each stablecoin can be exchanged for a basket of other crypto tokens. In this work, we investigate the impact of the collateral portfolio's composition on the resilience to this type of catastrophic event.
  arXiv  Detail & Related papers  (2024-05-14T04:01:32Z)
• Modeling and Analysis of Crypto-Backed Over-Collateralized Stable Derivatives in DeFi [5.4482836906033585]
  In decentralized finance (DeFi), stablecoins like DAI are designed to offer a stable value amidst the fluctuating nature of cryptocurrencies. We examine the class of crypto-backed stable derivatives, with a focus on mechanisms for price stabilization, which is exemplified by the well-known stablecoin DAI from MakerDAO.
  arXiv  Detail & Related papers  (2024-02-28T07:14:25Z)
• Diffusion Variational Autoencoder for Tackling Stochasticity in Multi-Step Regression Stock Price Prediction [54.21695754082441]
  Multi-step stock price prediction over a long-term horizon is crucial for forecasting its volatility. Current solutions to multi-step stock price prediction are mostly designed for single-step, classification-based predictions. We combine a deep hierarchical variational-autoencoder (VAE) and diffusion probabilistic techniques to do seq2seq stock prediction. Our model is shown to outperform state-of-the-art solutions in terms of its prediction accuracy and variance.
  arXiv  Detail & Related papers  (2023-08-18T16:21:15Z)
• Stock Price Prediction Under Anomalous Circumstances [81.37657557441649]
  This paper aims to capture the movement pattern of stock prices under anomalous circumstances. We train ARIMA and LSTM models at the single-stock level, industry level, and general market level. Based on 100 companies' stock prices in the period of 2016 to 2020, the models achieve an average prediction accuracy of 98%.
  arXiv  Detail & Related papers  (2021-09-14T18:50:38Z)
• Non-equilibrium non-Markovian steady-states in open quantum many-body systems: Persistent oscillations in Heisenberg quantum spin chains [68.8204255655161]
  We investigate the effect of a non-Markovian, structured reservoir on an open Heisenberg spin chain. We establish a coherent self-feedback mechanism as the reservoir couples frequency-dependent to the spin chain.
  arXiv  Detail & Related papers  (2020-06-05T09:16:28Z)
• From Tether to Libra: Stablecoins, Digital Currency and the Future of Money [62.997667081978825]
  It provides a compact definition for stablecoins, identifying the unique features that make them distinct from previously known payment systems. It surveys the different use cases for stablecoins as well as the underlying economic incentives for creating them.
  arXiv  Detail & Related papers  (2020-05-26T18:13:46Z)

This list is automatically generated from the titles and abstracts of the papers in this site.

This site does not guarantee the quality of this site (including all information) and is not responsible for any consequences.