A fundamentally risky approach to arbitrage
Alsayed, Hamad and McGroarty, Frank (2012) A fundamentally risky approach to arbitrage. Management Science (Submitted).
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Description/Abstract
Studies of statistical arbitrage based on price convergence between related assets typically rely on Ornstein-Uhlenbeck (OU) dynamics. OU does not allow for the breakdown in the price parity relationship, a well-documented economic risk called "fundamental risk". We employ a nonlinear generalization of OU that accommodates this risk.
| Item Type: | Article |
|---|---|
| ISSNs: | 0025-1909 (print) 1526-5501 (electronic) |
| Subjects: | H Social Sciences > HB Economic Theory H Social Sciences > HG Finance |
| Divisions: | Faculty of Business and Law > Southampton Management School > Finance |
| Item ID: | 343125 |
| Date Deposited: | 24 Sep 2012 15:33 |
| Last Modified: | 24 Sep 2012 15:35 |
| Contributors: | Alsayed, Hamad (Author) McGroarty, Frank (Author) |
| Date: | 17 September 2012 |
| Status: | Submitted |
| URI: | http://eprints.soton.ac.uk/id/eprint/343125 |
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