Structural break-aware pairs trading strategy using deep reinforcement learning

Jing You Lu, Hsu Chao Lai, Wen Yueh Shih, Yi-Feng Chen, Shen Hang Huang, Hao-Han Chang, Jun Zhe Wang, Jiun-Long Huang, Tian-Shyr Dai

研究成果: Article同行評審

2 引文 斯高帕斯(Scopus)

摘要

Pairs trading is an effective statistical arbitrage strategy considering the spread of paired stocks in a stable cointegration relationship. Nevertheless, rapid market changes may break the relationship (namely structural break), which further leads to tremendous loss in intraday trading. In this paper, we design a two-phase pairs trading strategy optimization framework, namely structural break-aware pairs trading strategy (SAPT), by leveraging machine learning techniques. Phase one is a hybrid model extracting frequency- and time-domain features to detect structural breaks. Phase two optimizes pairs trading strategy by sensing important risks, including structural breaks and market-closing risks, with a novel reinforcement learning model. In addition, the transaction cost is factored in a cost-aware objective to avoid significant reduction of profitability. Through large-scale experiments in real Taiwan stock market datasets, SAPT outperforms the state-of-the-art strategies by at least 456% and 934% in terms of profit and Sortino ratio, respectively.
原文American English
頁數40
期刊Journal of Supercomputing
78
DOIs
出版狀態Published - 17 8月 2021

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