Statistical arbitrage in jump-diffusion models with compound Poisson processes

Erdinc Akyildirim; Frank J. Fabozzi; Ahmet Goncu; Ahmet Sensoy

doi:10.1007/s10479-021-03965-w

Statistical arbitrage in jump-diffusion models with compound Poisson processes

Erdinc Akyildirim, Frank J. Fabozzi, Ahmet Goncu, Ahmet Sensoy^*

^*Bu çalışma için yazışmadan sorumlu yazar

Araştırma sonucu: ???type-name??? › Makale › bilirkişi

2 Atıf (Scopus)

Özet

We prove the existence of statistical arbitrage opportunities for jump-diffusion models of stock prices when the jump-size distribution is assumed to have finite moments. We show that to obtain statistical arbitrage, the risky asset holding must go to zero in time. Existence of statistical arbitrage is demonstrated via ‘buy-and-hold until barrier’ and ‘short until barrier’ strategies with both single and double barrier. In order to exploit statistical arbitrage opportunities, the investor needs to have a good approximation of the physical probability measure and the drift of the stochastic process for a given asset.

Orijinal dil	İngilizce
Sayfa (başlangıç-bitiş)	1357-1371
Sayfa sayısı	15
Dergi	Annals of Operations Research
Hacim	313
Basın numarası	2
DOI'lar	https://doi.org/10.1007/s10479-021-03965-w
Yayın durumu	Yayınlandı - Haz 2022
Harici olarak yayınlandı	Evet

Bibliyografik not

Publisher Copyright:
© 2021, The Author(s), under exclusive licence to Springer Science+Business Media, LLC part of Springer Nature.

Finansman

Ahmet Sensoy gratefully acknowledges support from the Turkish Academy of Sciences - Outstanding Young Scientists Award Program (TUBA-GEBIP).

Finansörler	Finansör numarası
TUBA-GEBIP
Türkiye Bilimler Akademisi

Belgeye Erişim

10.1007/s10479-021-03965-w

Diğer Dosyalar ve Linkler

Link to publication in Scopus

Alıntı Yap

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title = "Statistical arbitrage in jump-diffusion models with compound Poisson processes",

abstract = "We prove the existence of statistical arbitrage opportunities for jump-diffusion models of stock prices when the jump-size distribution is assumed to have finite moments. We show that to obtain statistical arbitrage, the risky asset holding must go to zero in time. Existence of statistical arbitrage is demonstrated via {\textquoteleft}buy-and-hold until barrier{\textquoteright} and {\textquoteleft}short until barrier{\textquoteright} strategies with both single and double barrier. In order to exploit statistical arbitrage opportunities, the investor needs to have a good approximation of the physical probability measure and the drift of the stochastic process for a given asset.",

keywords = "Compound Poisson process, Jump-diffusion model, Monte Carlo simulation, Statistical arbitrage",

author = "Erdinc Akyildirim and Fabozzi, {Frank J.} and Ahmet Goncu and Ahmet Sensoy",

note = "Publisher Copyright: {\textcopyright} 2021, The Author(s), under exclusive licence to Springer Science+Business Media, LLC part of Springer Nature.",

year = "2022",

month = jun,

doi = "10.1007/s10479-021-03965-w",

language = "English",

volume = "313",

pages = "1357--1371",

journal = "Annals of Operations Research",

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TY - JOUR

T1 - Statistical arbitrage in jump-diffusion models with compound Poisson processes

AU - Akyildirim, Erdinc

AU - Fabozzi, Frank J.

AU - Goncu, Ahmet

AU - Sensoy, Ahmet

PY - 2022/6

Y1 - 2022/6

N2 - We prove the existence of statistical arbitrage opportunities for jump-diffusion models of stock prices when the jump-size distribution is assumed to have finite moments. We show that to obtain statistical arbitrage, the risky asset holding must go to zero in time. Existence of statistical arbitrage is demonstrated via ‘buy-and-hold until barrier’ and ‘short until barrier’ strategies with both single and double barrier. In order to exploit statistical arbitrage opportunities, the investor needs to have a good approximation of the physical probability measure and the drift of the stochastic process for a given asset.

AB - We prove the existence of statistical arbitrage opportunities for jump-diffusion models of stock prices when the jump-size distribution is assumed to have finite moments. We show that to obtain statistical arbitrage, the risky asset holding must go to zero in time. Existence of statistical arbitrage is demonstrated via ‘buy-and-hold until barrier’ and ‘short until barrier’ strategies with both single and double barrier. In order to exploit statistical arbitrage opportunities, the investor needs to have a good approximation of the physical probability measure and the drift of the stochastic process for a given asset.

KW - Compound Poisson process

KW - Jump-diffusion model

KW - Monte Carlo simulation

KW - Statistical arbitrage

UR - http://www.scopus.com/inward/record.url?scp=85101748792&partnerID=8YFLogxK

U2 - 10.1007/s10479-021-03965-w

DO - 10.1007/s10479-021-03965-w

M3 - Article

AN - SCOPUS:85101748792

SN - 0254-5330

VL - 313

SP - 1357

EP - 1371

JO - Annals of Operations Research

JF - Annals of Operations Research

IS - 2

ER -

Statistical arbitrage in jump-diffusion models with compound Poisson processes

Özet

Bibliyografik not

Finansman

Belgeye Erişim

Diğer Dosyalar ve Linkler

Parmak izi

Alıntı Yap