Search results
Results from the WOW.Com Content Network
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 ...
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 .
Thorp wrote many articles about option pricing, Kelly criterion, statistical arbitrage strategies (6-parts series), [18] and inefficient markets. [19] In 1991, Thorp was an early skeptic of Bernie Madoff's supposedly stellar investing returns which were proved to be fraudulent in 2008. [20]
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 ...
The company was a pioneer in quantitative trading techniques, profiting from mispricings in derivatives, and later statistical arbitrage, which involved trading a large number of stocks for short-term returns.
Another set of high-frequency trading strategies are strategies that exploit predictable temporary deviations from stable statistical relationships among securities. Statistical arbitrage at high frequencies is actively used in all liquid securities, including equities, bonds, futures, foreign exchange, etc.
This strategy is categorized as a statistical arbitrage and convergence trading strategy. [1] Pair trading was pioneered by Gerry Bamberger and later led by Nunzio Tartaglia's quantitative group at Morgan Stanley in the 1980s. [2] The strategy monitors performance of two historically correlated securities.
A wide range of statistical arbitrage strategies have been developed whereby trading decisions are made on the basis of deviations from statistically significant relationships. Like market-making strategies, statistical arbitrage can be applied in all asset classes.