Online Learning Algorithms for Statistical Arbitrage

Arbitrage is the risk-free method of making profit from exploiting price differences in different markets. For example, if one stock is trading at a higher price in one market than another, one could buy the stock for the lower price on one market and sell it for the higher price on the other, thereby making profit without taking risks. These pricing disparities have become increasingly hard to capitalize on as they only appear for very short periods of time with the advancements in technology and highfrequency trading. Only those who can recognize and take advantage of arbitrage opportunities first can benefit, turning it into a winner-takes-all situation. This has made it difficult to make consistent profit from price discrepancies, as one needs to recognize them quickly and be the first to leverage them.