Related papers: Pairs Trading with Nonlinear and Non-Gaussian Stat…
We propose a new model for regression and dependence analysis when addressing spatial data with possibly heavy tails and an asymmetric marginal distribution. We first propose a stationary process with $t$ marginals obtained through scale…
In this study, we examine the fluctuation in the value of the Great Britain Pound (GBP). We focus particularly on its relationship with the United States Dollar (USD) and the Euro (EUR) currency pairs. Utilizing data from June 15, 2018, to…
Latent autoregressive processes are a popular choice to model time varying parameters. These models can be formulated as nonlinear state space models for which inference is not straightforward due to the high number of parameters. Therefore…
We introduce an ensemble learning method based on Gaussian Process Regression (GPR) for predicting conditional expected stock returns given stock-level and macro-economic information. Our ensemble learning approach significantly reduces the…
This paper studies the problem of determining the optimal cut-off for pairs trading rules. We consider two correlated assets whose spread is modelled by a mean-reverting process with stochastic volatility, and the optimal pair trading rule…
We propose a pairs trading model that incorporates a time-varying volatility of the Constant Elasticity of Variance type. Our approach is based on stochastic control techniques; given a fixed time horizon and a portfolio of two…
An exchangeable pair approach is commonly taken in the normal and non-normal approximation using Stein's method. It has been successfully used to identify the limiting distribution and provide an error of approximation. However, when the…
Financial markets are nonlinear with complexity, where different types of assets are traded between buyers and sellers, each having a view to maximize their Return on Investment (ROI). Forecasting market trends is a challenging task since…
This paper introduces an approach to gas-like models, from the concept of entropy, using the money stock data of two economic agents, in this case of two countries, which carry out market actions (trading) in two theoretical scenarios: in…
We introduce a new sequential methodology to calibrate the fixed parameters and track the stochastic dynamical variables of a state-space system. The proposed method is based on the nested hybrid filtering (NHF) framework of [1], that…
State-space models are a popular statistical framework for analysing sequential data. Within this framework, particle filters are often used to perform inference on non-linear state-space models. We introduce a new method, StateMixNN, that…
EPR steering is an asymmetric form of correlations which is intermediate between quantum entanglement and Bell nonlocality, and can be exploited for quantum communication with one untrusted party. In particular, steering of continuous…
Pairs trading is a family of trading techniques that determine their policies based on monitoring the relationships between pairs of assets. A common pairs trading approach relies on describing the pair-wise relationship as a linear Space…
State-space models are successfully used in many areas of science, engineering and economics to model time series and dynamical systems. We present a fully Bayesian approach to inference \emph{and learning} (i.e. state estimation and system…
\begin{abstract} In this paper, we integrated the statistical arbitrage strategy, pairs trading, into the Black-Litterman model and constructed efficient mean-variance portfolios. Typically, pairs trading underperforms under volatile or…
It is well known that the probability distribution of high-frequency financial returns is characterized by a leptokurtic, heavy-tailed shape. This behavior undermines the typical assumption of Gaussian log-returns behind the standard…
Theoretical approaches to binary-state models on complex networks are generally restricted to infinite size systems, where a set of non-linear deterministic equations is assumed to characterize its dynamics and stationary properties. We…
Wide class of elliptically contoured distributions is a popular model of stock returns distribution. However the important question of adequacy of the model is open. There are some results which reject and approve such model. Such results…
The impact of trades on asset prices is a crucial aspect of market dynamics for academics, regulators and practitioners alike. Recently, universal and highly nonlinear master curves were observed for price impacts aggregated on all…
We carry out a large-scale empirical data analysis to examine the efficiency of the so-called pairs trading. On the basis of relevant three thresholds, namely, starting, profit-taking, and stop-loss for the `first-passage process' of the…