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Relative Value Arbitrage.
Hi,I was wondering when you look at pairs trading is there any way you can assign a probability to the number of times the spread with revert to the mean in a set amount of time.Or apply a probability to the number of trading signals you will get in a set time?Thanks
Relative Value Arbitrage.
You can get an idea of the half life of the spread by regressing the spread value on the daily change in the spread. Your half life will then be ln(2)/(Beta_spread).
Last edited by DanM on August 9th, 2009, 10:00 pm, edited 1 time in total.