PhiMac Seminar-Fenghui Yu (TU Delft)-Dynamic Optimal Pairs Trading Strategies
Feb 3, 2023
11:45AM to 12:45PM
Date(s) - 03/02/2023
11:45 am - 12:45 pm
Abstract: Pairs trading is a market-neutral investment strategy and has been widely used by traders and hedge funds. It involves holding a long position and a short position simultaneously to take advantage of inefficient pricing in correlated securities. In this talk, I will present the dynamic optimal pairs trading strategies under symmetric and non-symmetric trading constraints. Under the assumption that the price spread of a pair of correlated securities follows a mean-reverting Ornstein-Uhlenbeck process, explicit analytical trading strategies are obtained under a mean-variance framework. Model estimation and empirical studies on trading strategies have been conducted using data on pairs of stocks and futures traded on securities market. The general cases beyond pairs trading will also be introduced in the end.
Location: Hamilton Hall, Room 410