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1、ThisProjectissubmittedaspartoftherequirementsfortheawardoftheMScinMathematicalTradingandFinanceDissertationTopicHighFrequencyPairstradinginIndianmarketAjayKumarKakaraniaSupervisor:GianlucaFusaiMSc.MathematicalTradingandFinanceCASSBusinessSchoolnd2Septem
2、ber,2013Keywords:Cointegration,High-frequencydata,Pairstrading,Thresholdmodelling,Timeadaptivemodels.1
3、PageAbstractInourresearch,weexaminetheperformanceofhighfrequencypairstradinginIndiafortheperiodofJanuarytoAugust2013.Weselectedallequitiesundertheinde
4、x‘NIFTY’.Theobjectiveofthisresearchistosuggestandquantifyimprovementstotheclassicalpairstradingstrategiesusingenhancedmodelingtechniques.Inparticular,weintroducethresholdmodelingforhigherreturns.Inourresearch,wemanagedacommittedandinvestedabsolutemeanre
5、turnof7%&21%withclassicalpairstradingstrategywhichimprovedto13%&38%respectivelywithourmodelingtechnique.ObservedSharperatiowas1inbothcases.2
6、PageExecutiveSummaryInourresearch,weattemptedtoaddressthequestionof‘Canhighfrequencypairstradingbesuccessfulinem
7、ergingmarket,India’.InIndianmarketcontext,thekeyexchangeinNationalStockExchange(NSE)anditsmostliquidindexisNIFTYwhichiscomposedof50stocks.Wewerecurioustoidentifyifwiththerealbid-askspreadandactualtransactioncostforretailtraders,coupledwithtradeslippages
8、;canwestillmakemoneyinthismarket?Inordertoaddressthis,weadoptedbothclassicalpairstradingandsomeenhancedmodelingapproaches.Inseveralexistingresearch,weobservesamplebiases,whereinwithanadoptedsetofmodels,whichareoptimizedforthemarketconditions;excessretur
9、nsconclusionsaredrawnaboutthesuccessandfailureofthetradingingeneral.Howeverintherealtrading,theseoptimizedmodelingconditionsmaynotprevaildependingonthestockpair,marketconditionsandotherfactors.Inourresearch,wehaveattemptedtoaddressthiskeyissuebutcollect
10、ingreturnsnotjustfromonecalibratedmodelbutfromallthedifferentpossiblecombinationsofmodelsparameterspossible.Togiveabroaderviewofthescopeofourwork,ourmodelswerecomposedof16keydifferentinputparametersappliedondifferent10stockpairsc
