Statistical Arbitrage Through Pairs Trading: A Practical Demonstration
A practical demonstration of pairs trading strategies using fractional cointegration and stochastic optimal control. The framework combines Ornstein-Uhlenbeck spread dynamics, Gaussian Process threshold optimization, and a reinforcement learning agent, achieving a Sharpe ratio of 2.86–3.27 on BTC/ETH with 35% higher risk-adjusted returns versus benchmarks.
