Analysis of stochastic technical trading algorithms

by Markus Höchstötter, Mher Safarian, Anna Krumetsadik

We apply the well-known CUSUM, the Girshick-Rubin, the Graversen-Peskir- Shiryaev and an improved alteration of the Brodsky-Darkovsky algorithm as trading strategies involving only mutually exclusive long positions in cash and the DAX at Xetra intraday auction prices. We select optimal pairs of fixed thresholds for up- and downmovements from a pre-defined two-dimensional grid, hence, admitting asymmetric intervals. We show that under three different scenarios for transaction costs, the improved Brodsky-Darkovsky technique not only outperforms the passive investment in the DAX but also the other three presented algorithms.

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Year of publication:	June 2016
Authors:	Höchstötter, Markus ; Safarian, Mher M. ; Krumetsadik, Anna
Publisher:	Karlsruhe : Karlsruher Institut für Technologie
Subject:	CUSUM \| Girshick-Rubin \| Graversen-Peskir-Shiryaev \| Brodsky-Darkovsky \| trading algorithm \| DAX \| Algorithmus \| Algorithm \| Theorie \| Theory \| Wertpapierhandel \| Securities trading \| Stochastischer Prozess \| Stochastic process \| Finanzanalyse \| Financial analysis \| Elektronisches Handelssystem \| Electronic trading \| Mathematische Optimierung \| Mathematical programming