Picking up the pennies in front of the bulldozer: the profitability of gilt trading strategies

Barry Quinn*, Alan Hanna, Fred McDonald

*Corresponding author for this work

Research output: Contribution to journalArticle

1 Citation (Scopus)
168 Downloads (Pure)

Abstract

We develop a simple cointegrated pairs trading strategy, including automatic risk control and adjustment for short-selling costs. We applied the strategy to the previously untested and highly liquid market for gilt futures. Profitability is exploited through the mean reversion in the relationship between long and medium gilt futures, and between medium and short gilt futures. Results show the potential for arbitrage profits exists, even using a relatively unsophisticated model, particularly between long and medium gilt futures.
Original languageEnglish
Pages (from-to)214-222
Number of pages9
JournalFinance Research Letters
Volume27
Early online date17 Mar 2018
DOIs
Publication statusPublished - Dec 2018

Keywords

  • Arbitrage trading
  • Fixed income market
  • market efficiency
  • UK gilt futures

ASJC Scopus subject areas

  • Finance

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