In this paper, we study trading strategies based on exponential moving averages ( ExpMA) , an important indicator in technical analysis. We seek optimal ExpMA strategies when the drift of the underlying is modeled by either an Ornstein-Uhlenbeck process or a two-state continuous-time Markov chain. Closed-form solutions are obtained under the logarithm utility maximization and the long-term growth rate maximization .
In this paper, we investigate trading strategies based on exponential moving averages ( ExpMAs) of an underlying risky asset. We study both logarithmic utility maximization and long-term growth rate maximization problems and find closed-form solutions when the drift of the underlying is modeled by either an Ornstein-Uhlenbeck process or a two-state continuous-time Markov chain. For the case of an Ornstein-Uhlenbeck drift, we carry out several Monte Carlo experiments in order to investigate how the performance of optimal ExpMA strategies is affected by variations in model parameters and by transaction costs .
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ExpMA) , an important indicator in technical analysis. We seek optimal ExpMA strategies
ExpMAs) of an underlying risky asset. We study both logarithmic utility maximization and long-term growth rate maximization problems and find closed-form solutions
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Closed-form solutions are obtained under the logarithm utility maximization and the long-term growth rate maximization
For the case of an Ornstein-Uhlenbeck drift, we carry out several Monte Carlo experiments in order to investigate how the performance of optimal ExpMA strategies is affected by variations in model parameters and by transaction costs