Quantitative spread trading on crude oil and refined products markets

Mark Cummins; Andrea Bucca

doi:10.1201/b19020

Quantitative spread trading on crude oil and refined products markets

Mark Cummins, Andrea Bucca

Accounting And Finance

Research output: Chapter in Book/Report/Conference proceeding › Chapter

Abstract

Quantitative trading in oil-based markets is investigated over 2003-2010, with a focus on WTI, Brent, heating oil and gas oil. A total of 861 spreads are considered. A novel optimal statistical arbitrage trading model is applied, with generalised stepwise procedures controlling for data snooping bias. Aggregating upward and downward mean-reversion, protable strategies are identied with Sharpe ratios greater than 2 in many instances. For the top categories, average daily returns range from 0.07 to 0.55%, with trade lengths of 9-55 days. A collapse in the number of protable trading strategies is seen in 2008. Robustness to varying transactions costs is examined.

Original language	English
Title of host publication	Commodities
Editors	M. A. H. Dempster, Ke Tang
Chapter	7
Pages	119-147
Number of pages	30
Edition	1st
ISBN (Electronic)	9781498712330, 9780429075940
DOIs	https://doi.org/10.1201/b19020
Publication status	Published - 1 Jan 2015

Keywords

oil-based markets
quantitative trading
novel optimal statistical arbitrage trading model

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10.1201/b19020

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title = "Quantitative spread trading on crude oil and refined products markets",

abstract = "Quantitative trading in oil-based markets is investigated over 2003-2010, with a focus on WTI, Brent, heating oil and gas oil. A total of 861 spreads are considered. A novel optimal statistical arbitrage trading model is applied, with generalised stepwise procedures controlling for data snooping bias. Aggregating upward and downward mean-reversion, protable strategies are identied with Sharpe ratios greater than 2 in many instances. For the top categories, average daily returns range from 0.07 to 0.55%, with trade lengths of 9-55 days. A collapse in the number of protable trading strategies is seen in 2008. Robustness to varying transactions costs is examined.",

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AB - Quantitative trading in oil-based markets is investigated over 2003-2010, with a focus on WTI, Brent, heating oil and gas oil. A total of 861 spreads are considered. A novel optimal statistical arbitrage trading model is applied, with generalised stepwise procedures controlling for data snooping bias. Aggregating upward and downward mean-reversion, protable strategies are identied with Sharpe ratios greater than 2 in many instances. For the top categories, average daily returns range from 0.07 to 0.55%, with trade lengths of 9-55 days. A collapse in the number of protable trading strategies is seen in 2008. Robustness to varying transactions costs is examined.

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ER -

Quantitative spread trading on crude oil and refined products markets

Abstract

Keywords

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