Arbitrage trading with fundamental risk
Alsayed, Hamad and McGroarty, Frank (2012) Arbitrage trading with fundamental risk. Economics Letters (Submitted).
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Description/Abstract
Studies of statistical arbitrage based on the price convergence between related securities often rely on Ornstein-Uhlenbeck (OU) dynamics. OU does not account for deteriorations in the pricing relationship, a well-documented economic risk factor termed "fundamental risk". We introduce a nonlinear generalization of OU aimed at capturing this phenomenon.
| Item Type: | Article |
|---|---|
| ISSNs: | 0165-1765 (print) |
| Related URLs: | |
| Subjects: | H Social Sciences > HG Finance |
| Divisions: | Faculty of Business and Law > Southampton Management School > Finance |
| Item ID: | 341452 |
| Date Deposited: | 25 Jul 2012 11:48 |
| Last Modified: | 25 Jul 2012 11:48 |
| Contributors: | Alsayed, Hamad (Author) McGroarty, Frank (Author) |
| Date: | 29 February 2012 |
| Status: | Submitted |
| URI: | http://eprints.soton.ac.uk/id/eprint/341452 |
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