Optimal pair trading: Consumption-investment problem with finite and infinite horizon

Kabanov Yuri () and Kozhevnikov Aleksei ()
Additional contact information
Kabanov Yuri: Lomonosov Moscow State University, MSE, Moscow, Russia; and Laboratoire de Mathématiques, UMR CNRS 6623, Université de Franche-Comté, Besançon, France
Kozhevnikov Aleksei: Lomonosov Moscow State University; and “Vega” Institute, Moscow, Russia

Statistics & Risk Modeling, 2024, vol. 41, issue 3-4, 83-93

Abstract: We present a simple solution of the consumption-investment problem pair trading on a finite time horizon. The proof is based on the remark that the HJB equation can be reduced to a linear parabolic equation solvable explicitly. As a further development we obtain also a solution of the problem for the infinite time horizon.

Keywords: Spread trading; pair trading; Ornstein–Uhlenbeck process; consumption-investment problem; HJB equation (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1515/strm-2024-0027 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bpj:strimo:v:41:y:2024:i:3-4:p:83-93:n:1002

Ordering information: This journal article can be ordered from
https://www.degruyter.com/journal/key/strm/html

DOI: 10.1515/strm-2024-0027

Access Statistics for this article

Statistics & Risk Modeling is currently edited by Robert Stelzer

More articles in Statistics & Risk Modeling from De Gruyter
Bibliographic data for series maintained by Peter Golla ().