Application of continuous - time random walk to statistical arbitrage
Application of continuous - time random walk to statistical arbitrage is a scholarly work, published in 2015 in ''Journal of Engineering Science and Technology Review''. The main subjects of the publication include variance, Continuous-time random walk, Statistical arbitrage, econometrics, arbitrage, computer science, economics, predictability, statistics, random walk, mathematics, econophysics, market forecast, and volatility. An analytical statistical arbitrage strategy is proposed, where the distribution of the spread is modelled as a continuous-time random walk.Optimal boundaries, computed as a function of the mean and variance of the firstpassage time of the spread, maximises an objective function.The predictability of the trading strategy is analysed and contrasted for two forms of continuous-time random walk processes.We found that the waiting-time distribution has a significant impact on the prediction of the expected profit for intraday trading.