Stochastics and Finance: Ruyi Liu -- Pairs-trading under geometric Brownian motions: An optimal strategy with cutting losses

Dear All, 

You are kindly invited to attend the next Stochastics and Finance seminar.  On Tuesday
September 15 at 3pm (Sydney time) Ruyi Liu will give a talk via Zoom.  Please note the
change of usual hour this semester.  

Zoom link: https://uni-sydney.zoom.us/j/94360647811 

 Speaker: Ruyi Liu (Shandong University) 

Title: Pairs-trading under geometric Brownian motions: An optimal strategy with cutting
losses 

Abstract: 

Pairs trading is about simultaneously trading a pair of stocks.  A pairs trade is
triggered when their prices diverge and consists of a short position of the strong stock
and a long position of the weak one.  Pairs trading bets on the reversal of their price
strengths.  In this paper, we study the optimal pairs trading problem under general
geometric Brownian motions and focus on trading with cutting losses.  The objective is
to trade the pairs over time to maximize an overall return with a fixed transaction
cost.  Our optimal policy is characterized by threshold curves obtained by solving the
associated HJB equations.  We provide sufficient conditions that guarantee the
optimality of our trading rules.  We also present numerical examples to illustrate.  



http://www.maths.usyd.edu.au/u/SemConf/Stochastics_Finance/seminar.html 



Please feel free to forward this message to anyone who might be interested in this
talk.  

Kind regards, 

 Anna