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Pairs trading: a copula approach
Includes bibliographical references.
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| Main Author: | |
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| Other Authors: | |
| Format: | Thesis |
| Language: | English |
| Published: |
Division of Actuarial Science
2014
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| _version_ | 1867613155984670720 |
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| access_status_str | Open Access |
| author | Augustine, Cecilia |
| author2 | Bosman, Petrus |
| author_browse | Augustine, Cecilia Bosman, Petrus |
| author_facet | Bosman, Petrus Augustine, Cecilia |
| author_sort | Augustine, Cecilia |
| collection | Thesis |
| description | Includes bibliographical references. |
| format | Thesis |
| id | oai:open.uct.ac.za:11427/8532 |
| institution | University of Cape Town (South Africa) |
| language | eng |
| last_indexed | 2026-06-10T12:31:38.662Z |
| license_str | Not specified — see source repository |
| provenance_str_mv | Harvested via OAI-PMH from UCTD — University of Cape Town Open Access Repository |
| publishDate | 2014 |
| publishDateRange | 2014 |
| publishDateSort | 2014 |
| publisher | Division of Actuarial Science |
| publisherStr | Division of Actuarial Science |
| record_format | dspace |
| source_str | UCTD — University of Cape Town Open Access Repository |
| spelling | oai:open.uct.ac.za:11427/8532 Pairs trading: a copula approach Augustine, Cecilia Bosman, Petrus Mathematical Finance Includes bibliographical references. Pairs trading is an arbitrage strategy that involves identifying a pair of stocks known to move together historically and trading on them when relative mispricing occurs. The strategy involves shorting the overvalued stock and simultaneously going long on the undervalued stock and closing the positions once the prices have returned to fair values. The cointegration method and the distance method are the most common techniques used in pairs trading strategy. However under these methods, the measure of divergence between the stocks or the spread is assumed to be symmetrically distributed about the mean zero. In addition, the spread is assumed to be a stationary time series (cointegration method) or mean-reverting (distance method). These assumptions are the main drawbacks of these methods and may lead to missed and/or inaccurate trading signals. The purpose of this dissertation is to explore an alternative approach to pairs trading by use of copulas. This dissertation aims to investigate if copulas can improve the profitability of pairs trading. To achieve this aim, results of pairs trading by use of copulas are compared against those of cointegration and distance methods. 2014-10-17T10:09:59Z 2014-10-17T10:09:59Z 2014 Master Thesis Masters MPhil http://hdl.handle.net/11427/8532 eng application/pdf Division of Actuarial Science Faculty of Commerce University of Cape Town |
| spellingShingle | Mathematical Finance Augustine, Cecilia Pairs trading: a copula approach |
| thesis_degree_str | Master's |
| title | Pairs trading: a copula approach |
| title_full | Pairs trading: a copula approach |
| title_fullStr | Pairs trading: a copula approach |
| title_full_unstemmed | Pairs trading: a copula approach |
| title_short | Pairs trading: a copula approach |
| title_sort | pairs trading a copula approach |
| topic | Mathematical Finance |
| url | http://hdl.handle.net/11427/8532 |
| work_keys_str_mv | AT augustinececilia pairstradingacopulaapproach |