Redefining Stablecoins from Nominal to Real Value: A Maximum Likelihood Approach
2026-08-31 • Computational Engineering, Finance, and Science
Computational Engineering, Finance, and Science
AI summaryⓘ
The authors explain that regular stablecoins, which try to keep their value tied to things like the US dollar, can't be perfectly stable because the value of those things changes. They created a new type of stablecoin based on something called the Maximum Likelihood Value (MLV), which is a way to find the most stable underlying value by analyzing many asset prices. Their approach uses statistics and finance theory to keep the stablecoin's value more consistent. Tests showed that this MLV-based stablecoin works in real time and helps improve investment returns while reducing how often you need to trade assets.
StablecoinMaximum Likelihood Value (MLV)Unit of accountInferential statisticsModern portfolio theoryReal returnMinimum-variance portfolioSharpe ratioPortfolio optimizationAsset price series
Authors
Tomonori Kanno, Kensuke Ito, Yushi Yoshimura, Kyohei Shibano
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.