Related papers: Statistical arbitrage portfolio construction based…
Statistical arbitrage exploits temporal price differences between similar assets. We develop a unifying conceptual framework for statistical arbitrage and a novel data driven solution. First, we construct arbitrage portfolios of similar…
Opportunities for stochastic arbitrage in an options market arise when it is possible to construct a portfolio of options which provides a positive option premium and which, when combined with a direct investment in the underlying asset,…
The study seeks to develop an effective strategy based on the novel framework of statistical arbitrage based on graph clustering algorithms. Amalgamation of quantitative and machine learning methods, including the Kelly criterion, and an…
Statistical arbitrage is a prevalent trading strategy which takes advantage of mean reverse property of spread of paired stocks. Studies on this strategy often rely heavily on model assumption. In this study, we introduce an innovative…
This paper examines the implementation of a statistical arbitrage trading strategy based on co-integration relationships where we discover candidate portfolios using multiple factors rather than just price data. The portfolio selection…
\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…
We present an approach, based on deep neural networks, that allows identifying robust statistical arbitrage strategies in financial markets. Robust statistical arbitrage strategies refer to trading strategies that enable profitable trading…
Statistical arbitrage exploits temporal price differences between similar assets. We develop a framework to jointly identify similar assets through factors, identify mispricing and form a trading policy that maximizes risk-adjusted…
How to hedge factor risks without knowing the identities of the factors? We first prove a general theoretical result: even if the exact set of factors cannot be identified, any risky asset can use some portfolio of similar peer assets to…
The purpose of this work is to explore the role that arbitrage opportunities play in pricing financial derivatives. We use a non-equilibrium model to set up a stochastic portfolio, and for the random arbitrage return, we choose a stationary…
Stochastic portfolio theory aims at finding relative arbitrages, i.e. trading strategies which outperform the market with probability one. Functionally generated portfolios, which are deterministic functions of the market weights, are an…
We propose a new method for finding statistical arbitrages that can contain more assets than just the traditional pair. We formulate the problem as seeking a portfolio with the highest volatility, subject to its price remaining in a band…
Statistical arbitrage is a class of financial trading strategies using mean reversion models. The corresponding techniques rely on a number of assumptions which may not hold for general non-stationary stochastic processes. This paper…
In this paper, the optimal mean-reverting portfolio (MRP) design problem is considered, which plays an important role for the statistical arbitrage (a.k.a. pairs trading) strategy in financial markets. The target of the optimal MRP design…
There is vast empirical evidence that given a set of assumptions on the real-world dynamics of an asset, the European options on this asset are not efficiently priced in options markets, giving rise to arbitrage opportunities. We study…
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.…
In stochastic portfolio theory, a relative arbitrage is an equity portfolio which is guaranteed to outperform a benchmark portfolio over a finite horizon. When the market is diverse and sufficiently volatile, and the benchmark is the market…
Pairs trading, a strategy that capitalizes on price movements of asset pairs driven by similar factors, has gained significant popularity among traders. Common practice involves selecting highly cointegrated pairs to form a portfolio, which…
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.…
In financial asset management, choosing a portfolio requires balancing returns, risk, exposure, liquidity, volatility and other factors. These concerns are difficult to compare explicitly, with many asset managers using an intuitive or…