| Title | Optimal Pairs Trading Strategies: A Stochastic Mean–Variance Approach |
| Author | |
| Corresponding Author | Wu，Chufang |
| Publication Years | 2022
|
| DOI | |
| Source Title | |
| ISSN | 0022-3239
|
| EISSN | 1573-2878
|
| Abstract | In this paper, we consider optimal pairs trading strategies in terms of static optimality and dynamic optimality under mean–variance criterion. The spread of the entity pairs is assumed to be mean-reverting and follows an Ornstein–Uhlenbeck process. A constrained optimal control problem is considered, and the Lagrange multiplier technique is adopted to transform the primal problem into a family of linear-quadratic optimal control problems that can be solved by the classical dynamic programming principle. Both solutions for static and dynamic optimal pairs trading problems are derived and discussed. We show that the “static and dynamic optimality” is a viable approach to the time-inconsistent control problem. Furthermore, numerical experiments are presented to demonstrate the performance of the optimal pairs trading strategies. |
| Keywords | |
| URL | [Source Record] |
| Indexed By | |
| Language | English
|
| SUSTech Authorship | Corresponding
|
| Funding Project | National Natural Science Foundation of China["11671158","11801262"]
; Research Grants Council of Hong Kong[17301522]
; Gruangdong Basic and Applied Basic Research Foundation 2021A[1515010031]
|
| WOS Research Area | Operations Research & Management Science
; Mathematics
|
| WOS Subject | Operations Research & Management Science
; Mathematics, Applied
|
| WOS Accession No | WOS:000886333800001
|
| Publisher | |
| ESI Research Field | ENGINEERING
|
| Scopus EID | 2-s2.0-85142238878
|
| Data Source | Scopus
|
| Citation statistics |
Cited Times [WOS]:0
|
| Document Type | Journal Article |
| Identifier | http://kc.sustech.edu.cn/handle/2SGJ60CL/412585 |
| Department | Department of Mathematics |
| Affiliation | 1.Delft Institute of Applied Mathematics,TU Delft,Delft,2628 CD,Netherlands 2.Advanced Modeling and Applied Computing Laboratory,Department of Mathematics,The University of Hong Kong,Pokfulam Road, Pokfulam,Hong Kong 3.Hughes Hall,Cambridge,Wollaston Road,United Kingdom 4.Department of Mathematics,Southern University of Science and Technology,Shenzhen,China |
| Corresponding Author Affilication | Department of Mathematics |
| Recommended Citation GB/T 7714 |
Yu，Fenghui,Ching，Wai Ki,Wu，Chufang,等. Optimal Pairs Trading Strategies: A Stochastic Mean–Variance Approach[J]. JOURNAL OF OPTIMIZATION THEORY AND APPLICATIONS,2022.
|
| APA |
Yu，Fenghui,Ching，Wai Ki,Wu，Chufang,&Gu，Jia Wen.(2022).Optimal Pairs Trading Strategies: A Stochastic Mean–Variance Approach.JOURNAL OF OPTIMIZATION THEORY AND APPLICATIONS.
|
| MLA |
Yu，Fenghui,et al."Optimal Pairs Trading Strategies: A Stochastic Mean–Variance Approach".JOURNAL OF OPTIMIZATION THEORY AND APPLICATIONS (2022).
|
| Files in This Item: | There are no files associated with this item. | |||||
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