Trading Strategies for Stock Pairs Regarding to the Cross-Impact Cost

@article{Wang2017TradingSF,
  title={Trading Strategies for Stock Pairs Regarding to the Cross-Impact Cost},
  author={Shanshan Wang},
  journal={Capital Markets: Market Efficiency eJournal},
  year={2017}
}
  • Shanshan Wang
  • Published 11 January 2017
  • Economics, Computer Science
  • Capital Markets: Market Efficiency eJournal
We extend the framework of trading strategies of Gatheral [2010] from single stocks to a pair of stocks. Our trading strategy with the executions of two round-trip trades can be described by the trading rates of the paired stocks and the ratio of their trading periods. By minimizing the potential cost arising from cross-impacts, i.e., the price change of one stock due to the trades of another stock, we can find out an optimal strategy for executing a sequence of trades from different stocks. We… 

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