A Non-Stationary Model for Statistical Arbitrage Trading
William Karel Bertram
affiliation not provided to SSRN
June 30, 2010
In this paper we present a non-stationary model for statistical arbitrage trading. This model represents the security price as the sum of an arithmetic Brownian motion and an Ornstein-Uhlenbeck process. A continuous time trading strategy is derived for the process and expressions for the expected value and the variance of the return are formulated. Analytic solutions to problem are obtained in the case where the non-stationary component has zero drift.
Number of Pages in PDF File: 17
Keywords: Econophysics, Stochastic Processes, Analytic Solutionsworking papers series
Date posted: July 1, 2010
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