Forecasting semi-stationary processes and statistical arbitrage

Si Bao, Shi Chen, Wei An Zheng and Yu Zhou

Statistical Theory and Related Fields, 2020, vol. 4, issue 2, 179-189

Abstract: If a financial derivative can be traded consecutively and its terminal payoffs can be adjusted as the sum of a bounded process and a stationary process, then we can use the moving average of the historical payoffs to forecast and the corresponding errors form a generalised mean reversion process. Thus we can price the financial derivatives by its moving average. One can even possibly get statistical arbitrage from certain derivative pricing. We particularly discuss the example of European call options. We show that there is a possibility to get statistical arbitrage from Black–Scholes's option price.

Date: 2020
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/24754269.2019.1675420 (text/html)
Access to full text is restricted to subscribers.

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:taf:tstfxx:v:4:y:2020:i:2:p:179-189

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/tstf20

DOI: 10.1080/24754269.2019.1675420

Access Statistics for this article

Statistical Theory and Related Fields is currently edited by Zhao Wei

More articles in Statistical Theory and Related Fields from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().