Ergodic aspects of trading with threshold strategies

TL;DR

This paper explores the long-term behavior of threshold-based trading strategies using ergodic control theory, demonstrating convergence of gains and extending stability results for Markovian price models.

Contribution

It provides the first analysis of ergodic properties of threshold strategies in Markovian settings, advancing their optimization and stability understanding.

Findings

Distribution of gains converges over time for given thresholds

Extended stability results for overshoots from i.i.d. to Markovian increments

Established ergodic properties of related functionals in trading strategies

Abstract

To profit from price oscillations, investors frequently use threshold-type strategies where changes in the portfolio position are triggered by some indicators reaching prescribed levels. In this paper, we investigate threshold-type strategies in the context of ergodic control. We make the first steps towards their optimization by proving the ergodic properties of related functionals. Assuming Markovian price increments satisfying a minorization condition and (one-sided) boundedness we show, in particular, that for given thresholds, the distribution of the gains converges in the long run. We also extend recent results on the stability of overshoots of random walks from the i.i.d.\ increment case to Markovian increments, under suitable conditions.