There are 2 versions of this paper. We analyze statistical arbitrage with pairs trading assuming that the spread of two assets follows a mean-reverting Ornstein-Uhlenbeck process around a long-term equilibrium level.

STATISTICAL ARBITRAGE PAIRS TRADING STRATEGIES: REVIEW AND OUTLOOK - Krauss - - Journal of Economic Surveys - Wiley Online Library

Within this framework, we prove the existence of statistical arbitrage and derive optimality conditions for trading the spread portfolio. In the existence of uncertainty in the long-term mean and the volatility of the spread, statistical arbitrage is no longer guaranteed.

Statistical Arbitrage – Correlation vs Cointegration | Gekko Quant – Quantitative Trading

However, the asymptotic probability of loss can be bounded as a function of the standard error of the model parameters. The proposed framework provides a new filtering technique for identifying best pairs in the market. Backtesting results are given for the five pairs of stocks considered in Zeng and Lee Statistical arbitrage, Pairs trading, Optimal trading, Ornstein-Uhlenbeck process.

Goncu, Ahmet and Akyildirim, Erdinc, Statistical Arbitrage with Pairs Trading May 25, Subscribe to this fee journal for more curated articles on this topic. Algorithmic Trading of Co-Integrated Assets. The Profitability of Pairs Trading Strategies: Distance, Cointegration, and Copula Methods. By Hossein RadRand LowThe Case of Gold and Silver: A New Algorithm for Pairs Trading.

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Selection of a Portfolio of Pairs Based on Cointegration: A Statistical Arbitrage Strategy. On the Persistence of Cointegration in Pairs Trading.

Which Trend Is Your Friend? By Ari Levine and Lasse Pedersen.

Carry and Trend Following Returns in the Statistical arbitrage pairs trading Exchange Market. By Andrew ClareJames SeatonEmpirical Investigation of an Equity Pairs Trading Strategy. By Huafeng jason ChenShaojun ChenEuropean Equity Pairs Trading: The Effect of Data Frequency on Risk and Return.

By Michael Lucey and Don Walshe.

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Not Available for Download Share: Using the URL or DOI link below will ensure access to this page indefinitely. Ahmet Goncu Xi'an Jiaotong University XJTU Erdinc Akyildirim Akdeniz University.

Statistical Arbitrage with Pairs Trading International Review of Finance, Vol. Bollinger bands for gold Arbitrage with Pairs Trading Posted: You are currently viewing this paper. Abstract We analyze statistical arbitrage with pairs trading statistical arbitrage pairs trading that the spread of two assets follows a mean-reverting Ornstein-Uhlenbeck process around a long-term equilibrium level.

Ahmet Goncu Xi'an Jiaotong University XJTU email Renai lu Suzhou, Jiangsu China. Erdinc Akyildirim Contact Author Akdeniz University email Antalya, Kampus Turkey.

Statistical arbitrage pairs trading strategies: Review and outlook

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EconPapers: Statistical arbitrage pairs trading strategies: Review and outlook

Related eJournals Capital Markets: Stulz at Ohio State University OSU - Department of Finance, G. William Schwert at University of Rochester - Simon Business School. Distance, Cointegration, and Copula Methods By Hossein RadRand LowA New Algorithm for Pairs Trading By Dr. Volatility Estimators, Trading Rules and Pairwise Correlations By Nick Baltas and Robert Kosowski Selection of a Portfolio of Pairs Based on Cointegration: By Ari Levine and Lasse Pedersen Carry and Trend Following Returns in the Foreign Exchange Market By Andrew ClareJames SeatonEmpirical Investigation of an Equity Pairs Trading Strategy By Huafeng jason ChenShaojun ChenThe Effect of Data Frequency on Risk and Return By Michael Lucey and Don Walshe.

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