Dynamics of Liquidity Surfaces in Uniswap v3
Fuente:
arXiv
Saved in:
| Main Authors: | , , |
|---|---|
| Format: | Preprint |
| Published: |
2025
|
| Subjects: | |
| Online Access: | |
| Tags: |
Add Tag
No Tags, Be the first to tag this record!
|
| _version_ | 1866909772547096576 |
|---|---|
| author | Risk, Jimmy Tung, Shen-Ning Wang, Tai-Ho |
| author_facet | Risk, Jimmy Tung, Shen-Ning Wang, Tai-Ho |
| contents | This paper presents a comprehensive study on the empirical dynamics of Uniswap v3 liquidity, which we model as a time-tick surface, $L_t(x)$. Using a combination of functional principal component analysis (FPCA) and dynamic factor methods, we analyze three distinct pools over multiple sample periods. Our findings offer three main contributions: a statistical characterization of automated market maker liquidity, an interpretable and portable basis for dimension reduction, and a robust analysis of liquidity dynamics using rolling window metrics. For the 5 bps pools, the leading empirical eigenfunctions explain the majority of cross-tick variation and remain stable, aligning closely with a low-order Legendre polynomial basis. This alignment provides a parsimonious and interpretable structure, similar to the dynamic Nelson-Siegel method for yield curves. The factor coefficients exhibit a time series structure well-captured by AR(1) models with clear GARCH-type heteroskedasticity and heavy-tailed innovations. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2509_05013 |
| institution | arXiv |
| publishDate | 2025 |
| record_format | arxiv |
| spellingShingle | Dynamics of Liquidity Surfaces in Uniswap v3 Risk, Jimmy Tung, Shen-Ning Wang, Tai-Ho Trading and Market Microstructure Applications 91G80, 62M10, 42C10, 60G10 This paper presents a comprehensive study on the empirical dynamics of Uniswap v3 liquidity, which we model as a time-tick surface, $L_t(x)$. Using a combination of functional principal component analysis (FPCA) and dynamic factor methods, we analyze three distinct pools over multiple sample periods. Our findings offer three main contributions: a statistical characterization of automated market maker liquidity, an interpretable and portable basis for dimension reduction, and a robust analysis of liquidity dynamics using rolling window metrics. For the 5 bps pools, the leading empirical eigenfunctions explain the majority of cross-tick variation and remain stable, aligning closely with a low-order Legendre polynomial basis. This alignment provides a parsimonious and interpretable structure, similar to the dynamic Nelson-Siegel method for yield curves. The factor coefficients exhibit a time series structure well-captured by AR(1) models with clear GARCH-type heteroskedasticity and heavy-tailed innovations. |
| title | Dynamics of Liquidity Surfaces in Uniswap v3 |
| topic | Trading and Market Microstructure Applications 91G80, 62M10, 42C10, 60G10 |
| url | https://arxiv.org/abs/2509.05013 |