Related papers: Gold Standard Pairs Trading Rules: Are They Valid?
In this paper, we explore an optimal timing strategy for the trading of price spreads exhibiting mean-reverting characteristics. A sequential optimal stopping framework is formulated to analyze the optimal timings for both entering and…
Trading styles can be classified into either trend-following or mean-reverting. If the net trading style is trend-following the traded asset is more likely to move in the same direction it moved previously (the opposite is true if the net…
Currency carry trade is the investment strategy that involves selling low interest rate currencies in order to purchase higher interest rate currencies, thus profiting from the interest rate differentials. This is a well known financial…
High-frequency quantitative trading strategies have long been of significant interest in futures market. While advanced statistical arbitrage and deep learning enhance high-frequency data processing, they diminish opportunities for…
The goal of cryptocurrencies is decentralization. In principle, all currencies have equal status. Unlike traditional stock markets, there is no default currency of denomination (fiat), thus the trading pairs can be set freely. However, it…
\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…
Trailing stop is a popular stop-loss trading strategy by which the investor will sell the asset once its price experiences a pre-specified percentage drawdown. In this paper, we study the problem of timing buy and then sell an asset subject…
The purpose of these notes is to provide a systematic quantitative framework - in what is intended to be a "pedagogical" fashion - for discussing mean-reversion and optimization. We start with pair trading and add complexity by following…
We introduce a new stochastic duration model for transaction times in asset markets. We argue that widely accepted rules for aggregating seemingly related trades mislead inference pertaining to durations between unrelated trades: while any…
Mean-reverting assets are one of the holy grails of financial markets: if such assets existed, they would provide trivially profitable investment strategies for any investor able to trade them, thanks to the knowledge that such assets…
Gold and currency markets form a unique pair with specific interactions and dynamics. We focus on the efficiency ranking of gold markets with respect to the currency of purchase. By utilizing the Efficiency Index (EI) based on fractal…
Recent studies have shown that online portfolio selection strategies that exploit the mean reversion property can achieve excess return from equity markets. This paper empirically investigates the performance of state-of-the-art mean…
Balanced and swap-robust minimal trades, introduced in [1], are important for studying the balance and stability of server access request protocols under data popularity changes. Constructions of such trades have so far relied on paired…
How effective are the most common trading models? The answer may help investors realize upsides to using each model, act as a segue for investors into more complex financial analysis and machine learning, and to increase financial literacy…
The goal of this study is to explain and examine the statistical underpinnings of the Bollinger Band methodology. We start off by elucidating the rolling regression time series model and deriving its explicit relationship to Bollinger…
We provide a natural learning process in which a financial trader without a risk receives a gain in case when Stock Market is inefficient. In this process, the trader rationally choose his gambles using a prediction made by a randomized…
A mean-reverting financial instrument is optimally traded by buying it when it is sufficiently below the estimated `mean level' and selling it when it is above. In the presence of linear transaction costs, a large amount of value is paid…
Water market is a contemporary marketplace for water trading and is deemed to one of the most efficient instruments to improve the social welfare. In modern water markets, the two widely used trading systems are an improved pair-wise…
We solve exactly a simple model of trend following strategy, and obtain the analytical shape of the profit per trade distribution. This distribution is non trivial and has an option like, asymmetric structure. The degree of asymmetry…
We run experimental asset markets to investigate the emergence of excess trading and the occurrence of synchronised trading activity leading to crashes in the artificial markets. The market environment favours early investment in the risky…