Impact of Volatility on Time-Based Transaction Ordering Policies
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arXiv
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| Main Authors: | , |
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| Format: | Preprint |
| Published: |
2025
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| _version_ | 1866918265335316480 |
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| author | Ko, Sunghun Park, Jinsuk |
| author_facet | Ko, Sunghun Park, Jinsuk |
| contents | We study Arbitrum's Express Lane Auction (ELA), an ahead-of-time second-price auction that grants the winner an exclusive latency advantage for one minute. Building on a single-round model with risk-averse bidders, we propose a hypothesis that the value of priority access is discounted relative to risk-neutral valuation due to the difficulty of forecasting short-horizon volatility and bidders' risk aversion. We test these predictions using ELA bid records matched to high-frequency ETH prices and find that the result is consistent with the model. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2512_23386 |
| institution | arXiv |
| publishDate | 2025 |
| record_format | arxiv |
| spellingShingle | Impact of Volatility on Time-Based Transaction Ordering Policies Ko, Sunghun Park, Jinsuk Computer Science and Game Theory Econometrics Trading and Market Microstructure We study Arbitrum's Express Lane Auction (ELA), an ahead-of-time second-price auction that grants the winner an exclusive latency advantage for one minute. Building on a single-round model with risk-averse bidders, we propose a hypothesis that the value of priority access is discounted relative to risk-neutral valuation due to the difficulty of forecasting short-horizon volatility and bidders' risk aversion. We test these predictions using ELA bid records matched to high-frequency ETH prices and find that the result is consistent with the model. |
| title | Impact of Volatility on Time-Based Transaction Ordering Policies |
| topic | Computer Science and Game Theory Econometrics Trading and Market Microstructure |
| url | https://arxiv.org/abs/2512.23386 |