High frequency pair trading with using Fuzzy SPC
Subject Areas : Financial engineeringMojtaba Dastoori 1 , saeed Fallahpour 2 , reza tehrani 3 , Mohamadreza Mehregan 4
1 - facualty of finance and accounting
Kish international branch of islamic azad university
2 - Assistant Prof. of Finance, Department of Management and accounting, Tehran University, Tehran,
3 - Prof. of Finance, Department of Management and accounting, Tehran University, Tehran, Iran.
4 - Prof. of industerial managment, Department of Management and accounting, Tehran University, Tehran, Iran
Keywords: cointegration, pair trading, high frequency trading, fuzzy SPC,
Abstract :
In today's world, capital markets have increased the possibility to generate profits through high-frequency transactions due to the advancement of computer technology and the use of IT infrastructure. The main objective of this research is to examine and provide a model of paired trading algorithms that can generate higher returns than coherent algorithms. In the background study, one of the limitations of the paired trading algorithm is the use of constant limits and rules that cannot model the dynamics of the system. This research based on the purpose is applied research and in terms of collecting data in the form of descriptive research with the approach of presenting a model. In order to test the model, using the data of 1395, intraday stock prices was used. The statistical population of this study was the top 50 Tehran Stock Exchange companies, using filtering the stocks to create a pair of shares decreased to 33, these shares was selected as sample. The results of the study were presented by implementing two algorithms of paired trading algorithms and paired trading algorithms statistical process fuzzy control. Finally, the results showed that the modified algorithm during the similar period of the investment could produce 57.95% of the return, while the base model had 46.17% returns on investment.
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