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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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.
|Subjects:||H Social Sciences > HB Economic Theory
H Social Sciences > HG Finance
|Divisions:||Faculty of Business and Law > Southampton Management School > Finance
|Date Deposited:||24 Sep 2012 15:33|
|Last Modified:||24 Sep 2012 15:35|
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