Name: Pairs Trading
ISBN: 9780471460671

Pairs Trading

The first in-depth analysis of pairs trading Pairs trading is a market-neutral strategy in its most simple form. The strategy involves being long (or bullish) one asset and short (or bearish) another. If properly performed, the investor will gain if the market rises or falls. Pairs Trading reveals the secrets of this rigorous quantitative analysis program to provide individuals and investment houses with the tools they need to successfully implement and profit from this proven trading methodology. Pairs Trading contains specific and tested formulas for identifying and investing in pairs, and answers important questions such as what ratio should be used to construct the pairs properly. Ganapathy Vidyamurthy (Stamford, CT) is currently a quantitative software analyst and developer at a major New York City hedge fund.

What Hacker News says

rfurlanNov 2011

Books I would recommend for beginners:

Evidence Based Technical Analysis: http://www.amazon.com/Evidence-Based-Technical-Analysis-Scie...

Pairs Trading: http://www.amazon.com/Pairs-Trading-Quantitative-Methods-Ana...

Quantitative Trading: http://www.amazon.com/Quantitative-Trading-Build-Algorithmic...

An Introduction to High Frequency Finance: http://www.amazon.com/Introduction-High-Frequency-Finance-Ra...

Trading and Exchanges: Market Microstructure for Practitioners: http://www.amazon.com/Trading-Exchanges-Market-Microstructur...

I also wrote a couple of very introductory articles, sadly I never got past part #2: http://www.bitcortex.com/2008/12/28/pragmatic-automated-trad... http://www.bitcortex.com/2009/01/04/pragmatic-automated-trad...

I am could mentor 1-2 HN readers that are serious about getting into quant trading. Just let me know you are interested :)

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ashikaJun 2010

Seconding interactive brokers for this type of experiment.

For a reasonably accessible, yet complete introduction to basic trade design, 'Pairs Trading' by Vidyamurthy is quite solid. The strategy may well be picked clean, but the book does a commendable job in exposing the general process of finding edge and minimizing slippage.

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ImprecateFeb 2010

Liquidity providers get paid to trade on most exchanges (maker-taker model).

ETA: That's not to say this is a good book. It's not. I'd recommend Vidyamurthy's Pairs Trading and Harris's Trading and Exchanges, but there really aren't many good books on this style of trading--anyone who knows how to do it well has no incentive to write a book on it.

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calabinMay 2020

One thing that you can do, and that has landed me a couple of prop offers, has been creating your own trade analysis projects.

I was writing spaghetti mathematica code and had a poor linear algebra understanding when I wrote up an implementation of the concepts in Ganapathy Vidyamurthy's book Pairs Trading. It was terrible code that was 1200 lines of procedural, no functions, no objects code, but they could see that I could hack it when it came to the math, could learn on my feet, and had the drive and creativity to work out problems put in front of me without a ton of handholding.

The additional benefit there is that I got to come in and talk about something that I built and knew intimately during the interview. When they asked me about my Kalman filter implementation I could speak knowledgeably because I built it, the differences between other forms of hedging ratios because these were considered in the book that I'd had to pound into my head. It seems a bit scary to put your work in front of these people with advanced degrees from universities that wouldn't even respond to your application, but it transitions the interview from being asked questions at random to talking about something you put six months of effort into, even if it it kind of sucks too.

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