Related papers: Pairs Trading: An Optimal Selling Rule with Constr…
This paper is concerned with an optimal strategy for simultaneously trading a pair of stocks. The idea of pairs trading is to monitor their price movements and compare their relative strength over time. A pairs trade is triggered by the…
This paper is concerned with a pairs trading rule. The idea is to monitor two historically correlated securities. When divergence is underway, i.e., one stock moves up while the other moves down, a pairs trade is entered which consists of a…
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…
Pair trading is a market-neutral quantitative trading strategy that exploits price anomalies between two correlated assets. By taking simultaneous long and short positions, it generates profits based on relative price movements, independent…
A pair trade is a portfolio consisting of a long position in one asset and a short position in another, and it is a widely applied investment strategy in the financial industry. Recently, Ekstr\"om, Lindberg and Tysk studied the problem of…
Pair trading is one of the most effective statistical arbitrage strategies which seeks a neutral profit by hedging a pair of selected assets. Existing methods generally decompose the task into two separate steps: pair selection and trading.…
This paper is concerned with an optimal stock selling rule under a Markov chain model. The objective is to find an optimal stopping time to sell the stock so as to maximize an expected return. Solutions to the associated variational…
Optimal trading strategies for pairs trading have been studied by models that try to find either optimal shares of stocks by assuming no transaction costs or optimal timing of trading fixed numbers of shares of stocks with transaction…
Pairs trading is a market-neutral strategy that exploits historical correlation between stocks to achieve statistical arbitrage. Existing pairs-trading algorithms in the literature require rather restrictive assumptions on the underlying…
Pairs-trading is a trading strategy that involves matching a long position with a short position in two stocks aiming at market-neutral profits. While a typical pairs-trading system monitors the prices of two statistically correlated stocks…
We study the problem of dynamically trading multiple futures contracts with different underlying assets. To capture the joint dynamics of stochastic bases for all traded futures, we propose a new model involving a multi-dimensional scaled…
We consider the problem of the optimal trading strategy in the presence of linear costs, and with a strict cap on the allowed position in the market. Using Bellman's backward recursion method, we show that the optimal strategy is to switch…
In this work, we study a dynamic portfolio optimization problem related to pairs trading, which is an investment strategy that matches a long position in one security with a short position in another security with similar characteristics.…
This paper studies an optimal trading problem that incorporates the trader's market view on the terminal asset price distribution and uninformative noise embedded in the asset price dynamics. We model the underlying asset price evolution by…
We consider a two-way trading problem, where investors buy and sell a stock whose price moves within a certain range. Naturally they want to maximize their profit. Investors can perform up to $k$ trades, where each trade must involve the…
This paper extends the optimal-trading framework developed in arXiv:2409.03586v1 to compute optimal strategies with real-world constraints. The aim of the current paper, as with the previous, is to study trading in the context of…
Pairs trading is a strategy based on exploiting mean reversion in prices of securities. It has been shown to generate significant excess returns, but its profitability has dropped significantly in recent periods. We employ the most common…
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…
We consider the problem of dynamic buying and selling of shares from a collection of $N$ stocks with random price fluctuations. To limit investment risk, we place an upper bound on the total number of shares kept at any time. Assuming that…
This paper derives a robust on-line equity trading algorithm that achieves the greatest possible percentage of the final wealth of the best pairs rebalancing rule in hindsight. A pairs rebalancing rule chooses some pair of stocks in the…