Intertemporal Pricing of Time-Bound Stablecoins: Measuring and Controlling the Liquidity-of-Time Premium
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| Format: | Preprint |
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2025
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| _version_ | 1866911195646132224 |
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| author | Borjigin, Ailiya He, Cong |
| author_facet | Borjigin, Ailiya He, Cong |
| contents | Time-bound stablecoins are DeFi assets that temporarily tokenize traditional securities during market off-hours, enabling continuous cross-market liquidity. We introduce the Liquidity-of-Time Premium (TLP): the extra return or cost of providing liquidity when the primary market is closed. We build a no-arbitrage pricing model that yields a band for fair values over different expiries, and a dynamic risk-control mechanism that adjusts loan-to-value (LTV) ratios in real time to keep TLP within a target range. Our analysis blends financial engineering (no-arbitrage conditions, option-style pricing) with empirical finance (event studies on cross-listed stocks and futures) to measure TLP under time-zone frictions. We define TLP formally, derive closed-form expressions for its term structure under idealized assumptions, and simulate scenarios that vary volatility and collateralization. We then propose an LTV policy that raises or lowers collateral to expand or curtail time-bound stablecoin supply, analogous to a central bank adjusting rates to defend a peg. We outline empirical proxies for TLP, including ADR premiums, overseas index futures versus cash index divergence, and pre-market versus official close gaps. Results show that TLP grows with closure length and volatility, yet can be contained by adaptive LTV. We provide backtests and figures (term-structure curves, capital-efficiency versus tail-risk trade-offs, time-liquidity heatmaps) and discuss protocol design (vault structure, closing-price oracles, on-chain auction liquidations). The findings position time-bound stablecoins as a tool to reduce temporal market inefficiencies and inform future research and deployment. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2510_05711 |
| institution | arXiv |
| publishDate | 2025 |
| record_format | arxiv |
| spellingShingle | Intertemporal Pricing of Time-Bound Stablecoins: Measuring and Controlling the Liquidity-of-Time Premium Borjigin, Ailiya He, Cong Distributed, Parallel, and Cluster Computing Computational Engineering, Finance, and Science Time-bound stablecoins are DeFi assets that temporarily tokenize traditional securities during market off-hours, enabling continuous cross-market liquidity. We introduce the Liquidity-of-Time Premium (TLP): the extra return or cost of providing liquidity when the primary market is closed. We build a no-arbitrage pricing model that yields a band for fair values over different expiries, and a dynamic risk-control mechanism that adjusts loan-to-value (LTV) ratios in real time to keep TLP within a target range. Our analysis blends financial engineering (no-arbitrage conditions, option-style pricing) with empirical finance (event studies on cross-listed stocks and futures) to measure TLP under time-zone frictions. We define TLP formally, derive closed-form expressions for its term structure under idealized assumptions, and simulate scenarios that vary volatility and collateralization. We then propose an LTV policy that raises or lowers collateral to expand or curtail time-bound stablecoin supply, analogous to a central bank adjusting rates to defend a peg. We outline empirical proxies for TLP, including ADR premiums, overseas index futures versus cash index divergence, and pre-market versus official close gaps. Results show that TLP grows with closure length and volatility, yet can be contained by adaptive LTV. We provide backtests and figures (term-structure curves, capital-efficiency versus tail-risk trade-offs, time-liquidity heatmaps) and discuss protocol design (vault structure, closing-price oracles, on-chain auction liquidations). The findings position time-bound stablecoins as a tool to reduce temporal market inefficiencies and inform future research and deployment. |
| title | Intertemporal Pricing of Time-Bound Stablecoins: Measuring and Controlling the Liquidity-of-Time Premium |
| topic | Distributed, Parallel, and Cluster Computing Computational Engineering, Finance, and Science |
| url | https://arxiv.org/abs/2510.05711 |