A stochastic model for commodity pairs trading
提出了一个最优配对交易模型，在商品期货市场验证其表现，发现价差残差存在显著均值回归和尖峰厚尾特征，模型能提供交易信号并筛选配对，回测显示即使考虑交易成本仍有盈利能力。
In this study, we introduce an optimal pairs trading model and verify its performance in the commodity futures markets. Empirical evidence from commodity futures indicates the existence of significant mean reversion together with high peak and fat tails for the distribution of spread residuals. Therefore, we assume an Ornstein–Uhlenbeck process with the noise term driven by a Lévy process with generalized hyperbolic distributed marginals. Our model not only provides trading signals, but also can be considered as a pair screening technique to rank all potential pairs for trade priority in terms of the distance to the expected profit-maximizing thresholds. Empirical examples and backtesting results obtained from commodity futures data show strong support for the profitability of the model even in the presence of transaction costs.