OpenAlex ·
Redefining Stablecoins from Nominal to Real Value: A Maximum Likelihood Approach
- Published
- Source
- OpenAlex
- Published in
- arXiv (Cornell University)
- DOI
- 10.48550/arxiv.2608.30225
- Original
- Read it at the publisher
- Topics
Abstract
Stablecoins, typically pegged to fiat currencies, cannot achieve true stability because they inherit fluctuations in the underlying unit of account. To overcome this limitation, we introduce a stablecoin pegged to the Maximum Likelihood Value (MLV), a newly defined unit of account derived as the most probable configuration of latent real-value movements that explains observed nominal-value (price) changes. Grounded in inferential statistics and modern portfolio theory, MLV represents the most stable unit of account, as it enforces a zero real return on the minimum-variance portfolio. Empirical results confirm the operational viability of an MLV-pegged stablecoin: MLV can be computed in real time from 500 asset price series and improves annualized returns and Sharpe ratios while substantially reducing turnover in portfolio optimization.
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