The Term Structure of Implied Fee Rates in Liquidity Pools

Diogo Duarte, Lucas X. Ferreira (), Emmanuel Gobet () and Yuri F. Saporito ()
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Diogo Duarte: FIU - Florida International University [Miami]
Emmanuel Gobet: LPSM (UMR_8001) - Laboratoire de Probabilités, Statistique et Modélisation - SU - Sorbonne Université - CNRS - Centre National de la Recherche Scientifique - UPCité - Université Paris Cité, Kaiko [Paris]
Yuri F. Saporito: FGV/EMAp - Fundação Getulio Vargas - Escola de Matemática Aplicada [Rio de Janeiro]

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Abstract: We develop a no-arbitrage framework to recover implied fee rates from option implied information and quantify fee compensation for liquidity providers in automated market maker (AMM) pools. Expected accumulated fees equal the current pool value minus the risk-neutral value of its terminal payoff, reducing forward looking LP compensation to pricing the LP payoff. We apply the framework to Uniswap v2 and Uniswap v3 ETH-USDC pools using a stochastic-volatility jump diffusion model calibrated to Deribit options. Implied fee rates are positive, time varying, downward sloping in maturity, and highly sensitive to range design, with tighter near-the-money ranges earning larger implied returns.

Keywords: Decentralized Finance; Liquidity Pools; AMM; Cryptocurrency (search for similar items in EconPapers)
Date: 2026-10-18
Note: View the original document on HAL open archive server: https://hal.science/hal-05804816v1
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