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H2 u2 u1 P U2 u2 U1 u1 u1 h1 u1 u2 P U1 u1 U2 u2 In case the conditional probability is higher lower than 0. Xie W. Liew Q. R. Wu Y. and Zou X. 2014. Pairs trading with copulas. Available at SSRN 2383185. Xie W. and Wu Y. 05 and P U2 u2 U1 u1 0. 95. Informally speaking an entry signal occurs when the transformed returns fall in the extreme regions in the northwest quadrant of a scatter plot of U1 and U2. Both authors first calculate the conditional marginal distribution functions as...
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