Scholars Release Research Paper on Implied Fee Term Structure of AMM Liquidity Pools
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Diogo Duarte, Lucas X. Ferreira, Emmanuel Gobet, and Yuri F. Saporito have released a research paper that constructs a no-arbitrage framework to extract implied fees from option-implied information, quantifying the fee compensation for liquidity providers in automated market maker (AMM) pools. This framework is applied to the ETH-USDC pools of Uniswap v2 and Uniswap v3, using a stochastic volatility jump-diffusion model calibrated to Deribit options. The study finds that implied fees are positive, time-varying, have a downward-sloping term structure, and are highly sensitive to range design, with narrower ranges closer to the strike price yielding higher implied returns.
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- arXiv q-finThe Term Structure of Liquidity Pool Implied Fees
The paper constructs a no-arbitrage framework to extract implied fees from option-implied information, quantifying fee compensation for liquidity providers in automated market maker (AMM) pools. The framework is applied to Uniswap v2 and Uniswap v3 ETH-USDC pools, using a stochastic volatility jump-diffusion model calibrated to Deribit options. The study finds implied fees are positive, time-varying, downward-sloping in term structure, and highly sensitive to range design, with narrower ranges closer to the strike yielding higher implied returns.
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