On Robustness of Double Linear Trading With Transaction Costs

  title={On Robustness of Double Linear Trading With Transaction Costs},
  author={Chung-Han Hsieh},
  journal={IEEE Control Systems Letters},
  • Chung-Han Hsieh
  • Published 26 September 2022
  • Mathematics
  • IEEE Control Systems Letters
A trading system is said to be robust if it generates a positive return regardless of market direction. To this end, a consistently positive expected trading gain is often used as a robustness metric for a trading system. In this letter, we propose a new class of trading policies called the double linear policy in an asset trading scenario when transaction costs are involved. Unlike many existing papers, we first show that the desired robust positive expected gain may disappear when transaction… 

Figures from this paper



Positive Expected Feedback Trading Gain for all Essentially Linearly Representable Prices

It is shown that the SLS trader’s expected gain is almost always positive and that it does not depend on the chosen price model but only on the trend, and also for SDEs without or with unknown closed-form solutions positive SLS trading gains can be proven.

On arbitrage possibilities via linear feedback in an idealized Brownian Motion stock market

  • B. BarmishJ. Primbs
  • Mathematics
    IEEE Conference on Decision and Control and European Control Conference
  • 2011
It is proved that the SLS feedback controller possesses a remarkable robustness property that guarantees a positive expected trading gain E[g(t)] > 0 in all idealized GBM markets with non-zero drift.

Stock Trading: An Optimal Selling Rule

  • Q. Zhang
  • Economics
    SIAM J. Control. Optim.
  • 2001
An optimal selling rule based on the model characterized by a number of geometric Brownian motions coupled by a finite-state Markov chain is obtained by solving a set of two-point boundary value differential equations.

An Optimal Strategy for Pairs Trading Under Geometric Brownian Motions

The optimal pairs-trading problem is considered by allowing the stock prices to follow general geometric Brownian motions and the objective is to trade the pairs over time to maximize an overall return with a fixed commission cost for each transaction.

A robust design strategy for stock trading via feedback control

This work proposes a reformulation of feedback trading as a trend following robust control problem, in which mild knowledge on the price range is exploited and is shown to outperform the state of the art methods on real-world stocks.

On stock trading using a controller with delay: The Robust Positive Expectation Property

A discrete-time version of the so-called Robust Positive Expectation Theorem which includes delay in the controller is presented which also applies to high-frequency trading since the discretization interval Δt is allowed to be arbitrarily small.

On Robust Optimal Linear Feedback Stock Trading

The take-off point for this paper is the Simultaneous Long-Short (SLS) control class, which is known to guarantee the so-called robust positive expectation (RPE) property. That is, the expected

A Generalization of Simultaneous Long–Short Stock Trading to PI Controllers

The main objective of this paper is to provide a generalization of the so-called Simultaneous Long–Short (SLS) stock-trading result in the feedback control literature and to establish this robust positive expectation property of the gain–loss function.