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Quantitative Finance · Begrippenlijst

Wat is Distance method, formation period, trading period?

Ook bekend als: distance method · formation period · trading period

Definition 4.2 Strategies I: Equities and Futures · Hoofdstuk 4 — Pairs and Baskets

The distance method selects the pairs of stocks whose normalised price paths (cumulative total return indices starting at one) have the smallest sum of squared differences over a formation period, and trades them over the following trading period, opening a pair when its spread exceeds a multiple of its formation-period standard deviation and closing it when the prices cross.

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