Zeping Bian - Optimal stopping for pairs trading strategies
| Dates: | 17 May 2023 |
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| Times: | 15:00 - 16:00 |
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| What is it: | Seminar |
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| Organiser: | Department of Mathematics |
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Zeping Bian (University of Manchester) will speak in the Probability seminar. (in-person)
The pairs trading strategy has been popular since introduced by Morgan Stanley in the 1980s. Investors gain profits by trading pairs of stocks which are assumed to have mean-reversion spread of prices. However, the assumed mean-reversion property could disappear at some random/unobservable time in reality. Then the investors will incur losses if the trading strategy is not adjusted. The mean-reversion property suggests that the spread could be modelled as an Ornstein-Uhleneck process that initially reverts to zero at a known mean-reversion rate and then after some random/unobservable time this mean-reversion rate is changed. Assuming that the Ornstein-Uhleneck process is observed in real-time, the problem is to detect when exactly this change occurs as accurately as possible.
This PhD project is supervised by Prof Goran Peskir.
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