2015/07/06 by Grigory Temnov, Temnov, Grigory
Economics, Econometrics and Finance · #60E05 #62M10 #Complex Systems and Time Series Analysis #Economic theories and models #FOS: Economics and business #FOS: Mathematics #Financial Markets and Investment Strategies #Probability (math.PR) #Trading and Market Microstructure (q-fin.TR)
paper · pdf · doi:10.48550/arxiv.1507.01610
openalex publication_date 2015/07/06 · openalex created_date 2022/10/05 · openalex updated_date 2026/07/28
We propose a strategy for automated trading, outline theoretical\njustification of the profitability of this strategy and overview the\nhypothetical results in application to currency pairs trading. The proposed\nmethodology relies on the assumption that processes reflecting the dynamics of\ncurrency exchange rates are in a certain sense similar to the class of\nOrnstein-Uhlenbeck processes and exhibits the mean reverting property. In order\nto describe the quantitative characteristics of the projected return of the\nstrategy, we derive the explicit expression for the running maximum of the\nOrnstein-Uhlenbeck process stopped at maximum drawdown and look at the\ncorrespondence between derived characteristics and the observed ones.\n