On upper gain bound for trading strategy based on cointegration

• Authors: Rafał Łochowski
• Languages of publication: EN

Abstracts

EN

A long-run trading strategy based on cointegration relationship between prices of two commodities is considered. A linear combination of the prices is assumed to be a stationary AR(1) process. In some range of parameters, AR(1) process is obtained by discrete sampling of Ornstein-Uhlenbeck process. This allows to calculate approximate number of transactions in long run trade horizon and obtain approximate upper bound for possible gain.

Keywords

EN

cointegration; AR(1) process; Ornstein-Uhlenbeck process; trading strategy

• Publisher: Katedra Ekonometrii i Statystyki, Szkoła Główna Gospodarstwa Wiejskiego w Warszawie
• Journal: Metody Ilościowe w Badaniach Ekonomicznych
• Year: 2010
• Volume: 11
• Issue: 1
• Pages: 110-117

Dates

published

2010

Contributors

author

Rafał Łochowski

• Department of Mathematical Economics, Warsaw School of Economics

References

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