Explore the inherent fragility of decentralized finance (DeFi) lending in this 49-minute lecture by Jonathan Chiu from the Bank of Canada. Delve into the volatility of crypto collateral values, special features of DeFi lending, and the impact of smart contracts on asymmetric information. Examine adverse selection, price-liquidity feedback, and the quantity and quality of lending in DeFi ecosystems. Analyze the pricing of collateral, implications for multiplicity and sentiments, and optimal contract term updates. Gain insights into lending protocols through an example of Aave, and understand the mathematical finance aspects of DeFi lending's inherent vulnerabilities.
Overview
Syllabus
Intro
Motivation
Questions
Related Literature on Defi
What we do
Volatility of Crypto Collateral Value Jan 2021 - Apr 2023
Special Features of DeFi Lending (cont'd)
Smart Contract and Asymmetric Info
Timeline
Adverse Selection
Price-Liquidty Feedback
Quantity and Quality of Lending
Pricing of Collateral
Implication 2: Multiplicity and Sentiments
Optimal Contract Terms Update
Conclusion
Lending Protocol Example: Aave
Taught by
Fields Institute
