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An Optimal Strategy for Pairs Trading Under Geometric Brownian Motions

文献类型：期刊论文

作者Tie, Jingzhi1; Zhang, Hanqin2,3; Zhang, Qing1
刊名JOURNAL OF OPTIMIZATION THEORY AND APPLICATIONS
出版日期2018-11-01
卷号179期号:2页码:654-675
关键词Pairs trading Optimal policy Quasi-variational inequalities 93E20 91G80 49L20
ISSN号0022-3239
DOI10.1007/s10957-017-1065-8
英文摘要This paper is concerned with an optimal strategy for simultaneously trading of a pair of stocks. The idea of pairs trading is to monitor their price movements and compare their relative strength over time. A pairs trade is triggered by their prices divergence and consists of a pair of positions to short the strong stock and to long the weak one. Such a strategy bets on the reversal of their price strengths. From the viewpoint of technical tractability, typical pairs-trading models usually assume a difference of the stock prices satisfies a mean-reversion equation. In this paper, we consider the optimal pairs-trading problem by allowing the stock prices to follow general geometric Brownian motions. The objective is to trade the pairs over time to maximize an overall return with a fixed commission cost for each transaction. The optimal policy is characterized by threshold curves obtained by solving the associated HJB equations. Numerical examples are included to demonstrate the dependence of our trading rules on various parameters and to illustrate how to implement the results in practice.
资助项目Simons Foundation[235179]
WOS研究方向Operations Research & Management Science ; Mathematics
语种英语
WOS记录号WOS:000447518900012
出版者SPRINGER/PLENUM PUBLISHERS
源URL[http://ir.amss.ac.cn/handle/2S8OKBNM/31355]  
专题应用数学研究所
通讯作者Zhang, Qing
作者单位1.Univ Georgia, Dept Math, Athens, GA 30602 USA
2.Acad Sinica, Acad Math & Syst Sci, Beijing 100190, Peoples R China
3.Natl Univ Singapore, Sch Business, Singapore 119245, Singapore
推荐引用方式
GB/T 7714		 Tie, Jingzhi,Zhang, Hanqin,Zhang, Qing. An Optimal Strategy for Pairs Trading Under Geometric Brownian Motions[J]. JOURNAL OF OPTIMIZATION THEORY AND APPLICATIONS,2018,179(2):654-675.
APA Tie, Jingzhi,Zhang, Hanqin,&Zhang, Qing.(2018).An Optimal Strategy for Pairs Trading Under Geometric Brownian Motions.JOURNAL OF OPTIMIZATION THEORY AND APPLICATIONS,179(2),654-675.
MLA Tie, Jingzhi,et al."An Optimal Strategy for Pairs Trading Under Geometric Brownian Motions".JOURNAL OF OPTIMIZATION THEORY AND APPLICATIONS 179.2(2018):654-675.

入库方式： OAI收割

来源：数学与系统科学研究院

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