Problem 45890. Algorithmic Trading - 4 (two thresholds)

Created by jmac

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This is the fourth of a series of problems on quant trading. It builds on earlier problems 45776, 45860, and 45884GoalSimilar to problem 45884, with an additional degree of freedom in the fractional trading strategy<ul><li>Use two thresholds to define 3 possible states of the trading signal, and establish a different level of exposure (between -2 and +3) to the traded security for each state</li></ul>You are given<ul><li>P, a n x 1 vector of daily prices of the traded security, at market open (always positive)</li><li>S, a n x 1 vector of trading signals, calculated just ahead of market open (can take any real value)</li><li>These will serve both as training and test set</li></ul>Your function should return<ul><li>T, a 2 x 1 vector, with T(1) &lt;= T(2), which determines the state of signal S</li><li>E, a 3 x 1 vector of security exposures in each state, i.e., invest a fraction E(k) of the available equity when <tt>S(i) &lt; T(k)</tt>, for <tt>k = 1 + (S(i)&lt;=T(1)) + (S(i)&lt;=T(2))</tt>, with <tt>-2 &lt;= E(k) &lt;= 3</tt>, for any k</li></ul>

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Problem 45890. Algorithmic Trading - 4 (two thresholds)

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