We found a match
Your institution may have access to this item. Find your institution then sign in to continue.
- Title
ALGORITHMIC TRADING OF CO-INTEGRATED ASSETS.
- Authors
CARTEA, ÁLVARO; JAIMUNGAL, SEBASTIAN
- Abstract
We assume that the drift in the returns of asset prices consists of an idiosyncratic component and a common component given by a co-integration factor. We analyze the optimal investment strategy for an agent who maximizes expected utility of wealth by dynamically trading in these assets. The optimal solution is constructed explicitly in closed-form and is shown to be affine in the co-integration factor. We calibrate the model to three assets traded on the Nasdaq exchange (Google, Facebook, and Amazon) and employ simulations to showcase the strategy's performance.
- Subjects
ALGORITHMIC trading (Securities); ASSETS (Accounting); RETURNS on sales; IDIOSYNCRATIC risk (Securities); INVESTMENT policy; NASDAQ Stock Market
- Publication
International Journal of Theoretical & Applied Finance, 2016, Vol 19, Issue 6, p-1
- ISSN
0219-0249
- Publication type
Article
- DOI
10.1142/S0219024916500382