Finding moving-band statistical arbitrages via convex–concave optimization

We propose a new method for finding statistical arbitrages that can contain more assets than just the traditional pair. We formulate the problem as seeking a portfolio with the highest volatility, subject to its price remaining in a band and a leverage limit. This optimization problem is not convex,...

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Vydáno v:Optimization and engineering Ročník 26; číslo 2; s. 1203 - 1224
Hlavní autoři: Johansson, Kasper, Schmelzer, Thomas, Boyd, Stephen
Médium: Journal Article
Jazyk:angličtina
Vydáno: Dordrecht Springer Nature B.V 01.06.2025
Témata:
Asset acquisitions
Convexity
Machine learning
Optimization
Prices
Profits
Stochastic control theory
Time series
ISSN:1389-4420, 1573-2924
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Shrnutí:We propose a new method for finding statistical arbitrages that can contain more assets than just the traditional pair. We formulate the problem as seeking a portfolio with the highest volatility, subject to its price remaining in a band and a leverage limit. This optimization problem is not convex, but can be approximately solved using the convex–concave procedure, a specific sequential convex programming method. We show how the method generalizes to finding moving-band statistical arbitrages, where the price band midpoint varies over time.
Bibliografie:ObjectType-Article-1
SourceType-Scholarly Journals-1
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ISSN:1389-4420
1573-2924
DOI:10.1007/s11081-024-09933-0