Apply the Kalman filter to dynamically estimate time-varying hedge ratio beta_t in pairs trading. The filter adapts the hedge ratio as the relationship between assets evolves over time.
Enter the values for the scenario you are assessing. Apply the Kalman filter to dynamically estimate time-varying hedge ratio beta_t in pairs trading. The filter adapts the hedge ratio as the relationship between assets evolves over time. Use the kalman filter spread result to inform your calculation.