Statistical arbitrage: Difference between revisions
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Amwelladmin (talk | contribs) Created page with "{{a|pb|{{image|LTCM|png|When start arb goes wrong.}}}}{{dpn|(also stat arb) /stəˈtɪstɪkəl ˈɑːbɪtrɪʤ/|n|}}A class of quantitative trading strategy short-term..." |
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{{a|pb|{{image|LTCM|png|When start arb goes wrong.}}}}{{dpn|(also [[stat arb]]) /stəˈtɪstɪkəl ˈɑːbɪtrɪʤ/|n|}}A class of [[quantitative trading strategy]] short-term trading strategies that seek out temporary discrepancies in market prices of similar instruments, and bet upon them converging on the presumption of [[mean reversion]] and the basic soundness, over time, of the [[efficient markets hypothesis]], supported by mathematical brainboxery, overwhelming computational horsepower, and lighting fast, and ''cheap'', access to trading platforms. | {{a|pb|{{image|LTCM|png|When start arb goes wrong.}}}}{{dpn|(also [[stat arb]]) /stəˈtɪstɪkəl ˈɑːbɪtrɪʤ/|n|}}A class of [[quantitative trading strategy]] short-term trading strategies that seek out temporary discrepancies in market prices of similar instruments, and bet upon them converging on the presumption of [[mean reversion]] and the basic soundness, over time, of the [[efficient markets hypothesis]], supported by mathematical brainboxery, overwhelming computational horsepower, and lighting fast, and ''cheap'', access to trading platforms. | ||
When it works, it works a charm: the top ranking stat arb hedge funds make extraordinary returns, especially when they drive hard bargains with their prime | When it works, it works a charm: the top ranking stat arb hedge funds make extraordinary returns, especially when they drive hard bargains with their [[prime broker]]s to secure cheap, committed funding. When it doesn’t work it can be a disaster, as the Nobel laureates and masters of the universe who founded [[Long Term Capital Management]], and then promptly blew it up, after the unseemly short term of four-and-a-half years. | ||
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*[[LTCM]] | |||
*[[Hedge fund]]s |