On Stock Trading Via Feedback Control When Underlying Stock Returns Are Discontinuous

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Baumann, Michael Heinrich:
On Stock Trading Via Feedback Control When Underlying Stock Returns Are Discontinuous.
University of Bayreuth, Department of Mathematics
Bayreuth , 2015 . - 16 S.

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Abstract

A lot of work was done on feedback trading. There, it is shown that for so-called simultaneously long short strategies, gains are positive for continuously differentiable prices and expected ones are positive for geometric Brownian motion prices. But, both models are jump-less. This work shows that if the price is governed by Merton’s jump diffusion model the expected gain is still positive and depends neither on intensity nor on kind or size of the jumps.