Application of continuous-time random walk to statistical arbitrage

Sergey Osmekhin, Frédéric Délèze

Research output: Contribution to journalArticleScientificpeer-review

Abstract

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 first-passage time of the 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.
Original languageEnglish
Peer-reviewed scientific journalJOURNAL OF ENGINEERING SCIENCE AND TECHNOLOGY REVIEW
Volume8
Issue number1
Pages (from-to)91-95
Number of pages4
ISSN1791-9320
Publication statusPublished - 2015
MoE publication typeA1 Journal article - refereed

Keywords

  • 512 Business and Management

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