Liquidity Provision Delta Hedge Via Options

Includes code to find an options portfolio to delta hedge both Uniswap v2 and Uniswap v3, emperical results, and plots. Paper.

Adam Khakhar and Xi Chen. 2022. Delta Hedging Liquidity Positions on Automated Market Makers. https://arxiv.org/abs/2208.03318.

If you use this code/research, please cite:

@misc{https://doi.org/10.48550/arxiv.2208.03318,
  doi = {10.48550/ARXIV.2208.03318},
  
  url = {https://arxiv.org/abs/2208.03318},
  
  author = {Khakhar, Adam and Chen, Xi},
  
  keywords = {Computational Engineering, Finance, and Science (cs.CE), Machine Learning (cs.LG), Trading and Market Microstructure (q-fin.TR), FOS: Computer and information sciences, FOS: Computer and information sciences, FOS: Economics and business, FOS: Economics and business, F.m},
  
  title = {Delta Hedging Liquidity Positions on Automated Market Makers},
  
  publisher = {arXiv},
  
  year = {2022},
  
  copyright = {arXiv.org perpetual, non-exclusive license}
}

Getting Started

1. Update config in /configs. (uniform_liquidity_config.json for Uniswap v2 and concentrated_liquidity_config.json for Uniswap v3).
2. Run python3 src/v2_experiment_runner.py for Uniswap v2 or python3 src/v3_experiment_runner.py for Uniswap v3.

Codebase Structure

.
├── LICENSE
├── README.md
├── configs
│   ├── concentrated_liquidity_config.json
│   └── uniform_liquidity_config.json
├── results
│   ├── IL.png
│   ├── LPPNL.png
│   ├── concentrated_liquidity.png
│   ├── experiment_v2_lppnl.png
│   ├── experiment_v2_options_target_pnl.png
│   ├── pool_assets_v3.png
│   └── uniform_liquidity.png
├── src
│   ├── delta_hedge
│   │   ├── AlgorithmicDataSet.py
│   │   ├── Derivative.py
│   │   ├── OptimizationRunner.py
│   │   ├── OptionsOptimizer.py
│   │   └── Train.py
│   ├── deribit
│   │   └── retrieve_instruments.py
│   ├── image_creation
│   │   └── plot_runner.py
│   ├── v2_experiment_runner.py
│   └── v3_experiment_runner.py
└── utils
    └── image_creation.py