Futures Trading Under Mean Reversion

Tim Leung and Xin Li

Chapter 5 in Optimal Mean Reversion Trading:Mathematical Analysis and Practical Applications, 2016, pp 105-127 from World Scientific Publishing Co. Pte. Ltd.

Abstract: Futures are an integral part of the universe of derivatives. A futures is a contract that requires the buyer to purchase (seller to sell) a fixed quantity of an asset, such as a commodity, at a fixed price to be paid for on a prespecified future date. Commonly traded on exchanges, there are futures written on various underlying assets or references, including commodities, interest rates, equity indices, and volatility indices. Many futures stipulate physical delivery of the underlying asset, with notable examples of agricultural, energy, and metal futures. However, some, like the VIX futures, are settled in cash…

Keywords: Trading Strategies; Mean Reversion; Optimal Stopping; Optimal Switching; Stop-Loss; Stochastic Processes; Exchange-Traded Funds (ETFS); Ornstein–Uhlenbeck Model; Cox-Ingersoll-Ross (CIR) Model (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (22)

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