The Term Structure of Implied Fee Rates in Liquidity Pools
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.
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