Back to Search
Start Over
On a New Paradigm for Stock Trading Via a Model-Free Feedback Controller.
- Source :
- IEEE Transactions on Automatic Control; Mar2016, Vol. 61 Issue 3, p662-676, 15p
- Publication Year :
- 2016
-
Abstract
- This paper describes a new paradigm for stock trading involving the use of classical feedback controllers which are “model free” in that they use neither parameterization nor estimation of stock price dynamics. At time $t$, the control signal is the investment level $I(t)$, obtained via a mapping on the so-called gain-loss function $g(t)$. While such strategies fall under the umbrella of technical analysis, our approach differs from the literature in a fundamental way: Whereas existing work in finance involves statistical analysis via historical back-testing, our new control-theoretic paradigm aims to provide “certification theorems” giving conditions under which certain robustness properties are guaranteed with respect to benchmark classes for the time-varying stock price $p(t)$. We demonstrate our ideas using a linear feedback implementation of a new stock-trading scheme called Simultaneous Long-Short. The analysis is carried out in a so-called idealized frictionless market first using smooth prices for pedagogical purposes and then using a more realistic benchmark involving Geometric Brownian Motion. Finally, simulations are given which include real-world implementation issues. [ABSTRACT FROM AUTHOR]
Details
- Language :
- English
- ISSN :
- 00189286
- Volume :
- 61
- Issue :
- 3
- Database :
- Complementary Index
- Journal :
- IEEE Transactions on Automatic Control
- Publication Type :
- Periodical
- Accession number :
- 113435479
- Full Text :
- https://doi.org/10.1109/TAC.2015.2444078