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A Probabilistic Analysis Of The Trading The Line Strategy, V. Abramov, M. K. Khan, Rasul A. Khan
A Probabilistic Analysis Of The Trading The Line Strategy, V. Abramov, M. K. Khan, Rasul A. Khan
Mathematics and Statistics Faculty Publications
We provide analytic models for which the appropriate statistics of the trading the line strategy, N h , can be derived in closed form. In particular, we provide closed-form expressions concerning the average duration of the open position, E(N h ), the variance of the open duration, Var(N h ), the average of the stopped log price, E(S N h ), the variance of the stopped log price, Var(S N h ), the correlation, Corr(N h , S N h ), and the Laplace transform, E(e−s N h ). These results are obtained, in discrete time settings, for binomial and …