9.6
Trading with Pricing Models
PYTHON PLUGIN
Commodities
Model
Description
Strategy 9.6: OU mean-reversion model for commodity pricing
Strategy Logic
Strategy 9.6: OU mean-reversion pricing model.
Fit an Ornstein-Uhlenbeck process:
dX = kappa * (a - X) * dt + sigma * dW
to log-prices. Estimate kappa (speed of mean reversion), a (long-run
mean), sigma via OLS on the discretised equation:
X(t) - X(t-1) = kappa * a * dt - kappa * X(t-1) * dt + eps
Compare model equilibrium price to market price:
if market < model => buy; if market > model => sell.
Parameters
| Parameter | Default Value | Type |
|---|---|---|
| ou_lookback | 252 | int |
| z_entry | 1.5 | float |
| z_exit | 0.5 | float |
Risk Configuration
| Risk Parameter | Value |
|---|---|
| Max Position Pct | 8.0% |
| Stop Loss Pct | 6.0% |
| Take Profit Pct | 12.0% |
| Max Drawdown Pct | 15.0% |