Applied Mathematical Finance· 2026Q2
Optimal Execution on Uniswap v2/v3 under Transient Price Impact
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- 2026year
Short summary
This paper derives optimal strategies for liquidating large positions on Uniswap v2 and v3, accounting for both immediate and decaying price impacts.
AI-generated from the title and abstract; the full text is not read.
Key points
- Optimal liquidation strategies for Uniswap v2 and v3 are derived, incorporating transient price impact.
- Uniswap v2 strategies are obtained in closed-form under general price dynamics.
- Uniswap v3 strategies are developed for multi-layer liquidity using dynamic programming and numerical methods.
- The influence of liquidity profiles on optimal execution strategies is highlighted.
AI-generated from the title and abstract; the full text is not read.
Abstract
We study the optimal liquidation of a large position on Uniswap v2 and Uniswap v3 in discrete time. The instantaneous price impact is derived from the AMM pricing rule. Transient impact is modelled to capture either exponential or approximately power-law decay, together with a permanent component. In the Uniswap v2 setting, we obtain optimal strategies in closed-form under general price dynamics. For Uniswap v3, we consider a two-layer liquidity framework, which naturally extends to multiple layers. We address the problem using dynamic programming under geometric Brownian motion dynamics and approximate the solution numerically using a discretization scheme. We obtain optimal strategies akin to classical ones in the LOB literature, with features specific to Uniswap. In particular, we show how the liquidity profile influences them.
The authors' abstract, as published at the source. Applied Mathematical Finance, 2026 · DOI ↗
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Field: Management Science and Operations Research
Management Science and Operations ResearchDecision Sciences