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The Geometric Phase of Stock Trading
Linköping University, Department of Electrical Engineering, Automatic Control. Linköping University, Faculty of Science & Engineering.ORCID iD: 0000-0003-4142-6502
2016 (English)In: PLoS ONE, ISSN 1932-6203, E-ISSN 1932-6203, Vol. 11, no 8, e0161538- p.Article in journal (Refereed) Published
Abstract [en]

Geometric phases describe how in a continuous-time dynamical system the displacement of a variable (called phase variable) can be related to other variables (shape variables) undergoing a cyclic motion, according to an area rule. The aim of this paper is to show that geometric phases can exist also for discrete-time systems, and even when the cycles in shape space have zero area. A context in which this principle can be applied is stock trading. A zero-area cycle in shape space represents the type of trading operations normally carried out by high-frequency traders (entering and exiting a position on a fast time-scale), while the phase variable represents the cash balance of a trader. Under the assumption that trading impacts stock prices, even zero-area cyclic trading operations can induce geometric phases, i.e., profits or losses, without affecting the stock quote.

Place, publisher, year, edition, pages
PUBLIC LIBRARY SCIENCE , 2016. Vol. 11, no 8, e0161538- p.
National Category
Computational Mathematics
Identifiers
URN: urn:nbn:se:liu:diva-132229DOI: 10.1371/journal.pone.0161538ISI: 000382258100050PubMedID: 27556642OAI: oai:DiVA.org:liu-132229DiVA: diva2:1039767
Note

Funding Agencies|Swedish Research Council [2015-04390]

Available from: 2016-10-25 Created: 2016-10-21 Last updated: 2016-11-15

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Altafini, Claudio
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