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arXiv · 1009.4683

Efficient Computation of Optimal Trading Strategies

Victor Boyarshinov·Malik Magdon-Ismail
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Abstract

Given the return series for a set of instruments, a \emph{trading strategy} is a switching function that transfers wealth from one instrument to another at specified times. We present efficient algorithms for constructing (ex-post) trading strategies that are optimal with respect to the total return, the Sterling ratio and the Sharpe ratio. Such ex-post optimal strategies are useful analysis tools. They can be used to analyze the "profitability of a market" in terms of optimal trading; to develop benchmarks against which real trading can be compared; and, within an inductive framework, the optimal trades can be used to to teach learning systems (predictors) which are then used to identify future trading opportunities.

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Victor Boyarshinov, Malik Magdon-Ismail. 2010-09-23. Efficient Computation of Optimal Trading Strategies. https://arxiv.org/abs/1009.4683

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