PAIRS TRADING OF TWO ASSETS WITH UNCERTAINTY IN CO-INTEGRATION'S LEVEL OF MEAN REVERSION

DOI10.1142/S0219024916500540zbMath1396.91693OpenAlexW3124495766MaRDI QIDQ2953311

Sangmin Lee, Andrew Papanicolaou

Publication date: 4 January 2017

Published in: International Journal of Theoretical and Applied Finance (Search for Journal in Brave)

Full work available at URL: https://doi.org/10.1142/s0219024916500540

zbMATH Keywords

stochastic controlKalman filterpartial informationco-integrationpairs trading

Mathematics Subject Classification ID

Signal detection and filtering (aspects of stochastic processes) (60G35) Optimal stochastic control (93E20) Financial applications of other theories (91G80) Portfolio theory (91G10)

Related Items (12)

Statistical arbitrage for multiple co-integrated stocks ⋮ TRADING MULTIPLE MEAN REVERSION ⋮ PAIRS TRADING UNDER DRIFT UNCERTAINTY AND RISK PENALIZATION ⋮ Robust dynamic pairs trading with cointegration ⋮ Stochastic control methods for optimization problems in Ornstein-Uhlenbeck spread models ⋮ EMA-type trading strategies maximize utility under partial information ⋮ Implicit incentives for fund managers with partial information ⋮ The value of knowing the market price of risk ⋮ Optimal convergence trading with unobservable pricing errors ⋮ Backward SDEs for control with partial information ⋮ Optimal investment and consumption under a continuous-time cointegration model with exponential utility ⋮ Optimal dynamic basis trading

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• Matrix Riccati equations in control and systems theory
• Risk-sensitive benchmarked asset management
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• Co-Integration and Error Correction: Representation, Estimation, and Testing
• Dequantization of the Dirac monopole

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