Pairs Trading: The Cointegration Approach and Minimum Profit Optimization

Join our reading group! https://hudsonthames.org/reading-group/ Cointegration is one of the most important statistical arbitrage strategies for pairs and multi-asset trading. In this talk, we cover the basic concepts of cointegration, the simulation of cointegrated pairs using a stationary AR(1) process, the application of mean first-passage time of an AR(1) process to optimize cointegrated pairs trading boundaries and frequency, and the numerical algorithm to generate the trading signal. Go-to-market faster than ever with ArbitrageLab, a python library that provides institutional-grade pairs trading algorithms to traders. * An Introduction to Cointegration for Pairs Trading: https://hudsonthames.org/an-introduction-to-cointegration/ * Slideshow Presentation: https://drive.google.com/file/d/1ZeJD81OrKln8QDxm1sU63ivRgqXCcQbS/view