Trading in Markovian Price Models

We examine a Markovian model for the price evolution of a stock, in which the probability of local upward or downward movement is arbitrarily dependent on the current price itself (and perhaps some auxiliary state information). Our main result is a “universally profitable” trading strategy — a single fixed strategy whose profitability competes with the optimal strategy, which knows all of the underlying parameters of the infinite and possibly nonstationary Markov process.

• Type: Conference
• Year: 2005
• Where: COLT
• Authors: Sham M. Kakade, Michael J. Kearns
• Keywords: Auxiliary State Information, COLT 2005, Markovian Model, Single fixed Strategy