Analysis of Ornstein-Uhlenbeck process stopped at maximum drawdown and application to trading strategies with trailing stops
A 2015 paper by Temnov on pairs trading and statistical arbitrage in currencies: the abstract mentions profits and drawdowns and leaves out a benchmark, an out-of-sample test, transaction costs, multiple testing and the size of the universe.
“In order to describe the quantitative characteristics of the projected return of the strategy, we derive the explicit expression for the running maximum of the Ornstein-Uhlenbeck process stopped at maximum drawdown and look at the correspondence between derived characteristics and the observed ones.”
AssetCurrenciescurrency pairs
StrategyPairs trading
ClaimProfitdrawdown
Missing from abstract: benchmark, out-of-sample test, costs, multiple testing, universe
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