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A Non-Stationary Model for Statistical Arbitrage Trading

William Karel Bertram

ITG Australia Limited

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 Solutions

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Date posted: July 1, 2010  

Suggested Citation

Bertram, William Karel, A Non-Stationary Model for Statistical Arbitrage Trading (June 30, 2010). Available at SSRN: https://ssrn.com/abstract=1632718 or http://dx.doi.org/10.2139/ssrn.1632718

Contact Information

William Karel Bertram (Contact Author)
ITG Australia Limited ( email )
1 Macquarie Place
Level 41
Sydney, 2000
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