[IEEE 2008 American Control Conference (
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Mudchanatongsuk, Supakorn; Primbs, James A.; Wong, Wilfred
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Article
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2008
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IEEE
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In this paper, we propose a stochastic control approach to the problem of pairs trading. We model the logrelationship between a pair of stock prices as an Ornstein-Uhlenbeck process and use this to formulate a portfolio optimization based stochastic control problem. We are able to obtain the optimal