Trading Strategies of a Leveraged ETF in a Continuous Double Auction Market Using an Agent-Based Simulation

Isao Yagi, Shunya Maruyama and Takanobu Mizuta

Papers from arXiv.org

Abstract: A leveraged ETF is a fund aimed at achieving a rate of return several times greater than that of the underlying asset such as Nikkei 225 futures. Recently, it has been suggested that rebalancing trades of a leveraged ETF may destabilize the financial markets. An empirical study using an agent-based simulation indicated that a rebalancing trade strategy could affect the price formation of an underlying asset market. However, no leveraged ETF trading method for suppressing the increase in volatility as much as possible has yet been proposed. In this paper, we compare different strategies of trading for a proposed trading model and report the results of our investigation regarding how best to suppress an increase in market volatility. As a result, it was found that as the minimum number of orders in a rebalancing trade increases, the impact on the market price formation decreases.

Date: 2020-10
New Economics Papers: this item is included in nep-cmp and nep-mst
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in Complexity, 3497689, Vol. 2020

Downloads: (external link)
http://arxiv.org/pdf/2010.13036 Latest version (application/pdf)

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:arx:papers:2010.13036

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().