B1965
Title: Pairs Trading for Levy-driven Ornstein-Uhlenbeck processes
Authors: Kevin Lu - Australian National University (Australia) [presenting]
Tim Leung - University of Washington (United States)
Abstract: Levy-driven Ornstein-Uhlenbeck processes allow for modelling of possibly infinite activity mean-reverting price processes with jumps. Using a weak variance alpha gamma process as the driving noise, we study how to perform pairs trading on spreads modelled by these processes using Monte Carlo methods with control variates. We numerically examine how the optimal trading strategies are affected by the model parameters when trading on univariate spreads and correlation on bivariate spreads.
