The Effect of Fat Tails on Rules for Optimal Pairs Trading: Performance Implications of Regime Switching with Poisson Events
This study examines the impact that fat-tailed distributions of the spread residuals have on the optimal orders for pairs trading of stocks and cryptocurrencies. Using daily data from selected pairs, the spread dynamics has been modeled through a mean-reverting Ornstein–Uhlenbeck process and investi...
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| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
| Published: |
MDPI AG
2025-06-01
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| Series: | International Journal of Financial Studies |
| Subjects: | |
| Online Access: | https://www.mdpi.com/2227-7072/13/2/96 |
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