On upper gain bound for trading strategy based on cointegration
On upper gain bound for trading strategy based on cointegration

Summary/Abstract: A long-run trading strategy based on cointegration relationship between prices of two commodities is considered. A linear combination of the prices is assumed to be a stationary AR(1) process. In some range of parameters, AR(1) process is obtained by discrete sampling of Ornstein-Uhlenbeck process. This allows to calculate approximate number of transactions in long run trade horizon and obtain approximate upper bound for possible gain.

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