Statistical Arbitrage Using the Kalman Filter

One of the challenges with the cointegration approach to statistical arbitrage which I discussed in my previous post, is that cointegration relationships are seldom static: they change quite frequently and often break down completely. ┬áBack in 2009 I began experimenting with a more dynamic approach to pairs trading, based on the Kalman Filter.   In … Continue reading Statistical Arbitrage Using the Kalman Filter