Optimal pair trading: Consumption-investment problem with finite and infinite horizon
-
Yuri Kabanov
and
Aleksei Kozhevnikov
Abstract
We present a simple solution of the consumption-investment problem pair trading on a finite time horizon. The proof is based on the remark that the HJB equation can be reduced to a linear parabolic equation solvable explicitly. As a further development we obtain also a solution of the problem for the infinite time horizon.
Funding source: Russian Science Foundation
Award Identifier / Grant number: 20-68-47030
Award Identifier / Grant number: 20-61-47043
Acknowledgements
This work was supported by the Russian Science Foundation, Grants No. 20-68-47030 and No. 20-61-47043.
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