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題名 Algorithmic pairs trading in the foreign exchange market 作者 羅嘉言
Lo, Jia Yan貢獻者 張元晨
Chang, Yuan chen
羅嘉言
Lo, Jia Yan關鍵詞 配對交易
外匯
演算法
Pairs trading
Foreign exchange
Algorithm日期 2016 上傳時間 3-Feb-2016 11:17:59 (UTC+8) 摘要 We implement the arbitrage strategies, Pair trading in the foreign exchange markets. Utilizing daily data from Jan. 2000 to Apr. 2014, our strategies generate Sharp ratios as high as 0.22. Based on the market neutrality and hedging characteristic in long-short investment, we provide the profitability analysis using four different approaches after considering transaction costs. These approaches consist of match with minimum distance between two normalized prices Distance); estimation of long-term equilibrium and model the resulting residuals (Cointegration); linear and Non-linear relationship between two potential assets (Correlation and Copula). With the result of CAPM test, positive and significant alpha represent our trading strategies is profitable during our sample period. The sources of excess returns reflect difference of liquidity, price pressure while executing trading and the compensation of violation in “Law of One Price"
We implement the arbitrage strategies, Pair trading in the foreign exchange markets. Utilizing daily data from Jan. 2000 to Apr. 2014, our strategies generate Sharp ratios as high as 0.22. Based on the market neutrality and hedging characteristic in long-short investment, we provide the profitability analysis using four different approaches after considering transaction costs. These approaches consist of match with minimum distance between two normalized prices Distance); estimation of long-term equilibrium and model the resulting residuals (Cointegration); linear and Non-linear relationship between two potential assets (Correlation and Copula). With the result of CAPM test, positive and significant alpha represent our trading strategies is profitable during our sample period. The sources of excess returns reflect difference of liquidity, price pressure while executing trading and the compensation of violation in “Law of One Price"參考文獻 Alexander, C., Dimitriu, A., 2002. The cointegration alpha: enhanced index tracking and long-short equity market neutral strategies. Discussion Papers in Finance ISMA Center 2002-08, University of Reading Alexander, C., Giblin, I., III, W.W., 2001. Cointegration and asset allocation, A new active hedge fund strategy. ISMA Centre Discussion Papers in Finance 2001-03 Andrade, S., Pietro, V.D., Seasholes, M., 2005. Understanding the profitability of pairs trading. Unpublished working paper, UC Berkeley, Northwestern University Avellaneda, M., Lee, J.-H., 2010. Statistical arbitrage in the US equities market. Quantitative Finance 10.7, 761-782 Bolgun, E., Kurun, E., Guven, S., 2010. Dynamic Pairs Trading Strategy For The Companies Listed In The Istanbul Stock Exchange. International Review of Applied Financial Issues and Economics, 37-57 Broussard, J.P., Vaihekoski, M., 2012. Profitability of pairs trading strategy in an illiquid market with multiple share classes. Journal of International Financial Markets, Institutions and Money 22, 1188-1201 Caldeira, J.o., Moura, G., 2013. Selection of a Portfolio of Pairs Based on Cointegration: A Statistical Arbitrage Strategy. Available at SSRN 2196391 Caldeira, J.o.F., Portugal, M.S., 2010. Estratégia Long-Short, Neutra ao Mercado, e Index Tracking Baseadas em Portfólios Cointegrados Revista Brasileira de Finanças 8.4, 469-504 Chan, E., 2009. Quantitative Trading: How to Build Your Own Algorithmic Trading Business. New Jersey: Wiley trading series. Chen, C.W.S., Chen, M., Chen, S.-Y., 2014. Pairs Trading via Three-Regime Threshold Autoregressive GARCH Models. 251, 127-140 DeMiguel, V., Garlappi, L., Nogales, F.J., Uppal, R., 2009. A generalized approach to portfolio optimization: Improving performance by constraining portfolio norms. Management Science55.5, 798-812 Desai, J., Trivedi, A., Joshi, N.A., 2012. The Case of Gold and Silver: A New Algorithm for Pairs Trading. Available at SSRN: http://ssrn.com/abstract=2152324 or http://dx.doi.org/10.2139/ssrn.2152324 Do, B., Faff, R., 2012. ARE PAIRS TRADING PROFITS ROBUST TO TRADING COSTS? Journal of Financial Research 35, 261-287 Do, B., Faff, R., Hamza, K., 2006. A new approach to modeling and estimation for pairs trading. Proceedings of 2006 Financial Management Association European Conference Dunis, C.L., Giorgioni, G., Laws, J., Rudy, J., 2010. Statistical Arbitrage and High-Frequency Data with an Application to Eurostoxx 50 Equities. CIBEF Working Papers Dunis, C.L., Ho., R., 2005. Cointegration portfolios of European equities for index tracking and market neutral strategies. Journal of Asset Management 6.1, 33-52 Elliotty, R.J., Van, J., Malcolm, W.P., 2005. Pairs trading. Quantitative Finance 10.7 5, 271–276 Galenko, A., Popova, E., Popova, I., 2007. Trading in the Presence of Cointegration. The Journal of Alternative Investments 15, 85-97 Gatev, E., William, N.G., Rouwenhorst, K.G., 2006. Pairs Trading: Performance of a Relative-Value Arbitrage Rule. Review of Financial Studies 19, 797-827 Gersch, C., 2014. 10 reasons to trade FX. Futures: News, Analysis & Strategies for Futures, Options & Derivatives Traders 43, 38-40 Gillespie, T., Ulph, C., 2001. Pair trades methodology: a question of mean reversion. in Proceedings of International Conference on Statistics, Combinatorics and Related Areas and the 8th International Conference of Forum for Interdisciplinary Mathematics, NSW Goetzman, W., Ingersoll, J., M. Spiegel, M., Welch, I., 2002. Sharpening Sharpe Ratios. Yale School of Management Working Papers. Hakkio, C.S., Rush, M., 1991. Cointegration: how short is the long run? Journal of International Money and Finance 10.4, 571-581 Hanno, L., Nikolai, R., Adrien, V., 2008. Common Risk Factors in Currency Markets. National Bureau of Economic Research, Inc Hansen, P.R., 2005. A test for superior predictive ability. Journal of Business & Economic Statistics 23.4 Huck, N., 2009. Pairs selection and outranking: An application to the S&P 100 index. European Journal of Operational Research 196, 819-825 Huck, N., 2010. Pairs trading and outranking: The multi-step-ahead forecasting case. European Journal of Operational Research 207, 1702-1716 Lee, C.I., Mathur, I., 1996. Trading rule profits in european currency spot cross-rates. Journal of Banking & Finance 20, 949-962 Lin, Y.-X., McRae, M., Gulati, C., 2006. Loss protection in pairs trading through minimum profits bounds: A cointegration approach. Journal of Applied Mathematics and Decision Sciences 1–14 Mudchanatongsuk, S., Primbs, J., Wong, W., 2008. Optimal pairs trading: A stochastic control approach. In American Control Conference. Washington, USA. Panyagometh, K., 2013. Pairs trading and value investings stratedies. International Journal of Business and Economics Perspectives 8 Papadakis, G., Wysocki, P., 2008. Papandakis, G. and Wisocky (2008) Pairs trading and accounting information. Working paper Perlin, M.S., 2009. Evaluation of pairs-trading strategy at the Brazilian financial market. J Deriv Hedge Funds 15, 122-136 Politis, D.N., Romano, J.P., 1994. The stationary bootstrap. Journal of the American Statistical Association 89.428, 1303-1313 Rampertshammer, S., 2007. An Ornstein-Uhlenbeck framework for pairs trading. Tech. rep., Department of Mathematics and Statistics, University of Melbourne, Australia. Available at http://www.ms.unimelb.edu.au/publications/RampertshammerStefan.pdf. Schmidt, A.D., 2008. Pairs trading: a cointegration approach. PhD thesis, University of Sydney Sipilä, M., 2013. Algorithmic Pairs Trading: Empirical Investigation of Exchange Traded Funds. Aalto University School of Business Sklar, A., 1959. Fonctions de répartition à n dimensions et leurs marges. Publications de l’Institut de Statistique de l’Université de Paris, 8:229–231 Sun, Y., Wu, X., 2009. A Nonparametric Study of Dependence Between S&P 500 Index and Market Volatility Index (VIX). Vidyamurthy, G., 2004. Pairs Trading: quantitative methods and analysis. Vol. 217. Wiley. White, H., 2000. A reality check for data snooping. Econometrica 68.5, 1097-1126 Xie, W., Wu, Y., 2013. Copula-Based Pairs Trading Strategy. Asian Finance Association (AsFA) 2013 Conference. Yilmaz, F., 2009. Imaginal Spreads and Pairs Trading. 描述 碩士
國立政治大學
財務管理研究所
101357033資料來源 http://thesis.lib.nccu.edu.tw/record/#G1013570331 資料類型 thesis dc.contributor.advisor 張元晨 zh_TW dc.contributor.advisor Chang, Yuan chen en_US dc.contributor.author (Authors) 羅嘉言 zh_TW dc.contributor.author (Authors) Lo, Jia Yan en_US dc.creator (作者) 羅嘉言 zh_TW dc.creator (作者) Lo, Jia Yan en_US dc.date (日期) 2016 en_US dc.date.accessioned 3-Feb-2016 11:17:59 (UTC+8) - dc.date.available 3-Feb-2016 11:17:59 (UTC+8) - dc.date.issued (上傳時間) 3-Feb-2016 11:17:59 (UTC+8) - dc.identifier (Other Identifiers) G1013570331 en_US dc.identifier.uri (URI) http://nccur.lib.nccu.edu.tw/handle/140.119/81118 - dc.description (描述) 碩士 zh_TW dc.description (描述) 國立政治大學 zh_TW dc.description (描述) 財務管理研究所 zh_TW dc.description (描述) 101357033 zh_TW dc.description.abstract (摘要) We implement the arbitrage strategies, Pair trading in the foreign exchange markets. Utilizing daily data from Jan. 2000 to Apr. 2014, our strategies generate Sharp ratios as high as 0.22. Based on the market neutrality and hedging characteristic in long-short investment, we provide the profitability analysis using four different approaches after considering transaction costs. These approaches consist of match with minimum distance between two normalized prices Distance); estimation of long-term equilibrium and model the resulting residuals (Cointegration); linear and Non-linear relationship between two potential assets (Correlation and Copula). With the result of CAPM test, positive and significant alpha represent our trading strategies is profitable during our sample period. The sources of excess returns reflect difference of liquidity, price pressure while executing trading and the compensation of violation in “Law of One Price" zh_TW dc.description.abstract (摘要) We implement the arbitrage strategies, Pair trading in the foreign exchange markets. Utilizing daily data from Jan. 2000 to Apr. 2014, our strategies generate Sharp ratios as high as 0.22. Based on the market neutrality and hedging characteristic in long-short investment, we provide the profitability analysis using four different approaches after considering transaction costs. These approaches consist of match with minimum distance between two normalized prices Distance); estimation of long-term equilibrium and model the resulting residuals (Cointegration); linear and Non-linear relationship between two potential assets (Correlation and Copula). With the result of CAPM test, positive and significant alpha represent our trading strategies is profitable during our sample period. The sources of excess returns reflect difference of liquidity, price pressure while executing trading and the compensation of violation in “Law of One Price" en_US dc.description.tableofcontents Table of Contents 1. INTRODUCTION 1 2. METHODOLOGY 5 2.1 DISTANCE APPROACH 5 2.1.1 Pairs selection in training period 6 2.1.2 Open/close signal in trading period 6 2.1.3 Assessment of trading performance 7 2.2 COINTEGRATION APPROACH 9 2.2.1 Pairs selection in training period 10 2.2.1.1 Step 1 (Detecting stationary process form each currency) 11 2.2.1.2 Step 2 (Checking the co-integration relationship) 11 2.2.2 Open/close signal in trading period 12 2.3 COPULA / CORRELATION APPROACH 14 2.3.1 Pairs selection in training period 14 2.3.2 Open/close signal in trading period 15 2.4 OTHER APPROACHES 16 3. DATA DESCRIPTION AND PORTFOLIO CLASSIFICATION 17 3.1 DATA SOURCES 17 3.2 PORTFOLIO CLASSIFICATION 19 4. EMPIRICAL RESULTS 21 4.1 MAIN RESULTS 21 4.2 MARKET RISK AND VALUE AT RISK (VAR) ANALYSIS 23 4.3 SUBPERIOD ANALYSIS 25 5. CONCLUSION 26 6. REFERENCES 28 APPENDIX A 48 zh_TW dc.source.uri (資料來源) http://thesis.lib.nccu.edu.tw/record/#G1013570331 en_US dc.subject (關鍵詞) 配對交易 zh_TW dc.subject (關鍵詞) 外匯 zh_TW dc.subject (關鍵詞) 演算法 zh_TW dc.subject (關鍵詞) Pairs trading en_US dc.subject (關鍵詞) Foreign exchange en_US dc.subject (關鍵詞) Algorithm en_US dc.title (題名) Algorithmic pairs trading in the foreign exchange market en_US dc.type (資料類型) thesis en_US dc.relation.reference (參考文獻) Alexander, C., Dimitriu, A., 2002. The cointegration alpha: enhanced index tracking and long-short equity market neutral strategies. Discussion Papers in Finance ISMA Center 2002-08, University of Reading Alexander, C., Giblin, I., III, W.W., 2001. Cointegration and asset allocation, A new active hedge fund strategy. ISMA Centre Discussion Papers in Finance 2001-03 Andrade, S., Pietro, V.D., Seasholes, M., 2005. Understanding the profitability of pairs trading. Unpublished working paper, UC Berkeley, Northwestern University Avellaneda, M., Lee, J.-H., 2010. Statistical arbitrage in the US equities market. Quantitative Finance 10.7, 761-782 Bolgun, E., Kurun, E., Guven, S., 2010. Dynamic Pairs Trading Strategy For The Companies Listed In The Istanbul Stock Exchange. International Review of Applied Financial Issues and Economics, 37-57 Broussard, J.P., Vaihekoski, M., 2012. Profitability of pairs trading strategy in an illiquid market with multiple share classes. Journal of International Financial Markets, Institutions and Money 22, 1188-1201 Caldeira, J.o., Moura, G., 2013. Selection of a Portfolio of Pairs Based on Cointegration: A Statistical Arbitrage Strategy. Available at SSRN 2196391 Caldeira, J.o.F., Portugal, M.S., 2010. Estratégia Long-Short, Neutra ao Mercado, e Index Tracking Baseadas em Portfólios Cointegrados Revista Brasileira de Finanças 8.4, 469-504 Chan, E., 2009. Quantitative Trading: How to Build Your Own Algorithmic Trading Business. New Jersey: Wiley trading series. Chen, C.W.S., Chen, M., Chen, S.-Y., 2014. Pairs Trading via Three-Regime Threshold Autoregressive GARCH Models. 251, 127-140 DeMiguel, V., Garlappi, L., Nogales, F.J., Uppal, R., 2009. A generalized approach to portfolio optimization: Improving performance by constraining portfolio norms. Management Science55.5, 798-812 Desai, J., Trivedi, A., Joshi, N.A., 2012. The Case of Gold and Silver: A New Algorithm for Pairs Trading. Available at SSRN: http://ssrn.com/abstract=2152324 or http://dx.doi.org/10.2139/ssrn.2152324 Do, B., Faff, R., 2012. ARE PAIRS TRADING PROFITS ROBUST TO TRADING COSTS? Journal of Financial Research 35, 261-287 Do, B., Faff, R., Hamza, K., 2006. A new approach to modeling and estimation for pairs trading. Proceedings of 2006 Financial Management Association European Conference Dunis, C.L., Giorgioni, G., Laws, J., Rudy, J., 2010. Statistical Arbitrage and High-Frequency Data with an Application to Eurostoxx 50 Equities. CIBEF Working Papers Dunis, C.L., Ho., R., 2005. Cointegration portfolios of European equities for index tracking and market neutral strategies. Journal of Asset Management 6.1, 33-52 Elliotty, R.J., Van, J., Malcolm, W.P., 2005. Pairs trading. Quantitative Finance 10.7 5, 271–276 Galenko, A., Popova, E., Popova, I., 2007. Trading in the Presence of Cointegration. The Journal of Alternative Investments 15, 85-97 Gatev, E., William, N.G., Rouwenhorst, K.G., 2006. Pairs Trading: Performance of a Relative-Value Arbitrage Rule. Review of Financial Studies 19, 797-827 Gersch, C., 2014. 10 reasons to trade FX. Futures: News, Analysis & Strategies for Futures, Options & Derivatives Traders 43, 38-40 Gillespie, T., Ulph, C., 2001. Pair trades methodology: a question of mean reversion. in Proceedings of International Conference on Statistics, Combinatorics and Related Areas and the 8th International Conference of Forum for Interdisciplinary Mathematics, NSW Goetzman, W., Ingersoll, J., M. Spiegel, M., Welch, I., 2002. Sharpening Sharpe Ratios. Yale School of Management Working Papers. Hakkio, C.S., Rush, M., 1991. Cointegration: how short is the long run? Journal of International Money and Finance 10.4, 571-581 Hanno, L., Nikolai, R., Adrien, V., 2008. Common Risk Factors in Currency Markets. National Bureau of Economic Research, Inc Hansen, P.R., 2005. A test for superior predictive ability. Journal of Business & Economic Statistics 23.4 Huck, N., 2009. Pairs selection and outranking: An application to the S&P 100 index. European Journal of Operational Research 196, 819-825 Huck, N., 2010. Pairs trading and outranking: The multi-step-ahead forecasting case. European Journal of Operational Research 207, 1702-1716 Lee, C.I., Mathur, I., 1996. Trading rule profits in european currency spot cross-rates. Journal of Banking & Finance 20, 949-962 Lin, Y.-X., McRae, M., Gulati, C., 2006. Loss protection in pairs trading through minimum profits bounds: A cointegration approach. Journal of Applied Mathematics and Decision Sciences 1–14 Mudchanatongsuk, S., Primbs, J., Wong, W., 2008. Optimal pairs trading: A stochastic control approach. In American Control Conference. Washington, USA. Panyagometh, K., 2013. Pairs trading and value investings stratedies. International Journal of Business and Economics Perspectives 8 Papadakis, G., Wysocki, P., 2008. Papandakis, G. and Wisocky (2008) Pairs trading and accounting information. Working paper Perlin, M.S., 2009. Evaluation of pairs-trading strategy at the Brazilian financial market. J Deriv Hedge Funds 15, 122-136 Politis, D.N., Romano, J.P., 1994. The stationary bootstrap. Journal of the American Statistical Association 89.428, 1303-1313 Rampertshammer, S., 2007. An Ornstein-Uhlenbeck framework for pairs trading. Tech. rep., Department of Mathematics and Statistics, University of Melbourne, Australia. Available at http://www.ms.unimelb.edu.au/publications/RampertshammerStefan.pdf. Schmidt, A.D., 2008. Pairs trading: a cointegration approach. PhD thesis, University of Sydney Sipilä, M., 2013. Algorithmic Pairs Trading: Empirical Investigation of Exchange Traded Funds. Aalto University School of Business Sklar, A., 1959. Fonctions de répartition à n dimensions et leurs marges. Publications de l’Institut de Statistique de l’Université de Paris, 8:229–231 Sun, Y., Wu, X., 2009. A Nonparametric Study of Dependence Between S&P 500 Index and Market Volatility Index (VIX). Vidyamurthy, G., 2004. Pairs Trading: quantitative methods and analysis. Vol. 217. Wiley. White, H., 2000. A reality check for data snooping. Econometrica 68.5, 1097-1126 Xie, W., Wu, Y., 2013. Copula-Based Pairs Trading Strategy. Asian Finance Association (AsFA) 2013 Conference. Yilmaz, F., 2009. Imaginal Spreads and Pairs Trading. zh_TW
