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.
|Peer-reviewed scientific journal||JOURNAL OF ENGINEERING SCIENCE AND TECHNOLOGY REVIEW|
|Number of pages||4|
|Publication status||Published - 2015|
|MoE publication type||A1 Journal article - refereed|
- 512 Business and Management
Osmekhin, S., & Délèze, F. (2015). Application of continuous-time random walk to statistical arbitrage. JOURNAL OF ENGINEERING SCIENCE AND TECHNOLOGY REVIEW, 8(1), 91-95. http://www.jestr.org/downloads/Volume8Issue1/fulltext168115.pdf