Application of continuous-time random walk to statistical arbitrage
An analytical statistical arbitrage strategy is proposed, where the distribution of the spread is modelled as a continuous-time random walk. Optimal boundaries, computed as a function of the mean and variance of the firstpassage time ofthe spread,maximises an objective function. The predictability...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
Eastern Macedonia and Thrace Institute of Technology
2015-01-01
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| Series: | Journal of Engineering Science and Technology Review |
| Subjects: | |
| Online Access: | http://www.jestr.org/downloads/Volume8Issue1/fulltext168115.pdf |
| Summary: | An analytical statistical arbitrage strategy is proposed, where the distribution of the spread is modelled as a
continuous-time random walk. Optimal boundaries, computed as a function of the mean and variance of the firstpassage
time ofthe spread,maximises an objective function. The predictability of the trading strategy is analysed
and contrasted for two forms of continuous-time random walk processes. We found that the waiting-time
distribution has a significant impact on the prediction of the expected profit for intraday trading |
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| ISSN: | 1791-2377 1791-2377 |