Statistical arbitrage in jump-diffusion models with compound poisson processes
Date
2021-02-26
Editor(s)
Advisor
Supervisor
Co-Advisor
Co-Supervisor
Instructor
BUIR Usage Stats
4
views
views
64
downloads
downloads
Citation Stats
Series
Abstract
We prove the existence of statistical arbitrage opportunities for jump-diffusion models of stock prices when the jump-size distribution is assumed to have finite moments. We show that to obtain statistical arbitrage, the risky asset holding must go to zero in time. Existence of statistical arbitrage is demonstrated via ‘buy-and-hold until barrier’ and ‘short until barrier’ strategies with both single and double barrier. In order to exploit statistical arbitrage opportunities, the investor needs to have a good approximation of the physical probability measure and the drift of the stochastic process for a given asset.
Source Title
Annals of Operations Research
Publisher
Springer Nature
Course
Other identifiers
Book Title
Degree Discipline
Degree Level
Degree Name
Citation
Permalink
Published Version (Please cite this version)
Collections
Language
English