tech.nmfin.algoquant.demo.model.jurek2007

Class OULogSpreadCRRASignalDemo

java.lang.Object

tech.nmfin.algoquant.demo.model.jurek2007.OULogSpreadCRRASignalDemo

@Demo
public class OULogSpreadCRRASignalDemo
extends Object

This demonstrates the P&L when applying the optimal mean reversion trading strategy to an OU asset.

Using this example. Illustrates the OU log-spread trading signal and its P/L calculation using the parameters in main. Follow the modeled spread and risk-aversion inputs separately from any market-data assumptions; the theoretical model does not establish that a real pair follows an OU process.

Model and publication. The cited working paper studies finite-horizon allocation to a mean-reverting arbitrage opportunity under investor preferences. Its public abstract was verified, but full text was unavailable; the exact allocation implementation must be read in the library rather than assumed from this citation.

Implementation in this tutorial. The demo generates an OU path, fits it with OUFittingMLE and calls OUSpreadCRRASignal.getOptimalAllocation(price, W, tau). gamma is risk aversion, tau is remaining horizon and r*delta is the rate passed to the signal. W stays fixed while W_new records cumulative wealth, so this is not compounding allocation. Fitting and evaluation use the same generated path. The older Kim/Primbs/Boyd reference is related background, not the provenance of the Jurek-named class.

Author:

Kevin Sun

See Also:

Kim, S. J., Primbs, J., Boyd, S., Dynamic Spread Trading, 2008, J. W. Jurek and H. Yang (2007), Dynamic Portfolio Selection in Arbitrage, working paper, SSRN 882536

Constructor Summary

Constructors

Constructor and Description
OULogSpreadCRRASignalDemo(long seed)

Method Summary

Modifier and Type	Method and Description
static void	main(String[] args)
double	run(double gamma, boolean isPrint) Gets the Sharpe ratio.

Methods inherited from class java.lang.Object

clone, equals, finalize, getClass, hashCode, notify, notifyAll, toString, wait, wait, wait

Constructor Detail

OULogSpreadCRRASignalDemo

public OULogSpreadCRRASignalDemo(long seed)

Method Detail

main

public static void main(String[] args)

run

public double run(double gamma,
                  boolean isPrint)

Gets the Sharpe ratio.

Parameters:

gamma - the risk aversion rate

isPrint - to print logging info

Returns:

the Sharpe ratio