Xu, Jing and Yang, Peiquan: Pairs Trading with Costly Short-Selling Abstract: We study an optimal pairs-trading model with costly short-selling, allowing for an empirically documented negative relation between
Xu (2015) Costly arbitrage through pairs trading, Journal of Economic Dynamics and Control 56, 1-19.Lei, Y. and Xu, J. (2015). Costly arbitrage through pairs trading. Journal of Economic Dynamics and Control, 56:1-19.Costly arbitrage through pairs trading[J] . Yaoting Lei,Jing Xu....
Arbitrage AsymmetryPairs tradingLimits of arbitrageThis paper explains the idiosyncratic risk puzzle in a novel test setting with a combination of arbitrage risk and arbitrage asymmetry as in Stambaugh/Yu/Yuan (doi:10.2139/ssrn.2833800Stephanie Sarah Riedinger...