Hypotheses
KO–PEP Frozen-Reference Excursion Convergence
Derived by the Research Lead from Anna Ananova, Rama Cont and Renyuan Xu's Model-free Analysis of Dynamic Trading Strategies: trade two-sided excursions of the KO–PEP regression spread and close on return to its frozen…
Hypothesis
Derived by the Research Lead from Anna Ananova, Rama Cont and Renyuan Xu's Model-free Analysis of Dynamic Trading Strategies: trade two-sided excursions of the KO–PEP regression spread and close on return to its frozen reference. Use synchronized 1-HOUR bars on USEQ instead of the paper's unavailable historical second-by-second NYSE midprices. Preserve its five-session regression window and use its reported 3.2-sigma KO–PEP threshold as the baseline, without treating that empirical optimum as verified performance. Add a cost-aware minimum excursion, a bounded spread-loss exit and a time stop. Estimate coefficients before each session only while flat; freeze coefficients, residual scale and quantities throughout each position. This is an adapted experiment, not a reproduction of the paper's empirical results. The supplied full text establishes the trading rules that the abstract alone leaves unspecified.
Analysis
Model-free Analysis of Dynamic Trading Strategies
Backtest and paper results are hypothetical. Trading involves risk of loss.