A singular stochastic control approach for optimal pairs trading with proportional transaction costs
Pairs trading and statistical arbitrage in equities, studied by Xing in 2019 with a mathematical derivation. The abstract mentions an out-of-sample test and transaction costs but not a benchmark, multiple testing or the size of the universe.
“We show that the value function of the control problem is the unique viscosity solution of a nonlinear quasi-variational inequality, which is equivalent to a free boundary problem for the singular stochastic control value function.”
AssetEquities
StrategyPairs tradingportfolio optimization
TechniqueMathematical derivation
GeographyUS
Also stated: out-of-sample test, costs
Missing from abstract: benchmark, multiple testing, universe
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The paper's neighbourhoodPairs trading and statistical arbitrage by year
FamilyPairs trading and statistical arbitrage93Momentum and trend following289Factor investing240Machine learning return prediction15318 more · 909
AssetEquities51
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