Stock trading: How mathematics can help
University of Georgia
Date and Time Will Be Announced
Trading a stock involves a sequence of decisions to buy or sell the security over time. Traditional trading strategies include: buy and hold; buy high and sell higher; buy on dips and sell on rallies; buy low and sell high. These trading strategies can be put into two categories: Momentum (trend following) trading and mean reversion trading.
In this talk, I will present our recent results on both mean reversion and momentum trading. Our objective is to buy and sell the asset sequentially in order to maximize the overall profit. Mathematically, this amounts to determining a sequence of stopping times. We consider both mean reversion and trend following (Geometric Brownian motions with regime switching) models, establish the associated dynamic programming equations, and provide sufficient conditions that guarantee the optimality of our trading strategies. Numerical examples including simulations and market tests will also be presented.
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