A1581
Title: Copula-based trading of cointegrated cryptocurrency pairs
Authors: Masood Tadi - Prague University of Economics and Business (Czech Republic) [presenting]
Jiri Witzany - University of Economics in Prague (Czech Republic)
Abstract: A novel pairs trading strategy is introduced based on copulas for cointegrated pairs of cryptocurrencies. To identify the most suitable pairs and generate trading signals formulated from a reference asset for analyzing the mispricing index, linear and nonlinear cointegration tests are employed, and a correlation coefficient measure and different copula families are fit, respectively. The strategy's performance is then evaluated by conducting back-testing for various triggers of opening positions, assessing its returns and risks. The findings indicate that the proposed method outperforms previously examined trading strategies of pairs based on cointegration or copulas in terms of profitability and risk-adjusted returns.
