Model-based pairs trading in the bitcoin markets

【Author】 Lintilhac, P. S.; Tourin, A.

【Source】QUANTITATIVE FINANCE

【影响因子】1.986

【Abstract】We propose an optimal dynamic pairs trading strategy model for a portfolio of cointegrated assets. Using stochastic control techniques, we compute analytically the optimal portfolio weights and relate our result to several other strategies commonly used by practitioners, including the static double-threshold strategy. Finally, we apply our model to a bitcoin portfolio and conduct an out-of-sample test with historical data from three exchanges, with two cointegrating relations.

【Keywords】Stochastic control; Pairs trading; Merton problem; Cointegration; Statistical arbitrage

【发表时间】2017 MAY

【收录时间】2022-01-02

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