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In finance, statistical arbitrage (often abbreviated as Stat Arb or StatArb) is a class of short-term financial trading strategies that employ mean reversion models involving broadly diversified portfolios of securities (hundreds to thousands) held for short periods of time (generally seconds to days). These strategies are supported by ...
A pairs trade or pair trading is a market neutral trading strategy enabling traders to profit from virtually any market conditions: uptrend, downtrend, or sideways movement. This strategy is categorized as a statistical arbitrage and convergence trading strategy. [ 1 ]
Proprietary traders may use a variety of strategies such as index arbitrage, statistical arbitrage, merger arbitrage, fundamental analysis, volatility arbitrage, or global macro trading, much like a hedge fund. [2]
In the London office, quants create algorithmic trading strategies and software. The traders who are based in the Guernsey office use the trading signals produced from these software to perform trades. The firm is known to pay very high starting salaries of almost $200,000 to new graduates who join the firm as quants.
gretl is an example of an open-source statistical package. ADaMSoft – a generalized statistical software with data mining algorithms and methods for data management; ADMB – a software suite for non-linear statistical modeling based on C++ which uses automatic differentiation; Chronux – for neurobiological time series data; DAP – free ...
In finance, volatility arbitrage (or vol arb) is a term for financial arbitrage techniques directly dependent and based on volatility. A common type of vol arb is type of statistical arbitrage that is implemented by trading a delta neutral portfolio of an option and its underlying .
Index arbitrage is a subset of statistical arbitrage focusing on index components.. An index (such as S&P 500) is made up of several components (in the case of the S&P 500, 500 large US stocks picked by S&P to represent the US market), and the value of the index is typically computed as a linear function of the component prices, where the details of the computation (such as the weights of the ...
When TGS started trading, it pursued a form of statistical arbitrage and within a few years, it had made enough to return money to most of its outside investors. [3] [4] As it no longer needed to solicit outsiders for capital, the firm had more flexibility on pursuing its own investment strategies without needing to disclose them.