The Microstructure of Cointegrated Assets

Sasha Stoikov


Senior Research Associate, Cornell Financial Engineering Manhattan

The paper “The Microstructure of Cointegrated Assets” is available via SSRN:


Sasha Stoikov
Cornell Financial Engineering Manhattan

Peter Decrem
Citibank, N.A. – Citi Fixed Income Currency & Commodities

Yikai Hua
Cornell Financial Engineering Manhattan

Anne Shen
Cornell Financial Engineering Manhattan

Date Written: April 11, 2021


We define the micro price of multiple cointegrated assets. This yields a notion of fair prices, as a function of the observable state of multiple order books. We compute the microprices of two highly cointegrated assets, using Level-1 data collected on Interactive Brokers. We design an execution algorithm based on this two dimentional microprice and show that it can save half of the bid-ask spread cost.

Stoikov, Sasha and Decrem, Peter and Hua, Yikai and Shen, Anne, The Microstructure of Cointegrated Assets (April 11, 2021). Available at SSRN: or

Disclosure: Interactive Brokers

Information posted on IBKR Traders’ Insight that is provided by third-parties and not by Interactive Brokers does NOT constitute a recommendation by Interactive Brokers that you should contract for the services of that third party. Third-party participants who contribute to IBKR Traders’ Insight are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.

This material is from Sasha Stoikov and is being posted with permission from Sasha Stoikov. The views expressed in this material are solely those of the author and/or Sasha Stoikov and IBKR is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

In accordance with EU regulation: The statements in this document shall not be considered as an objective or independent explanation of the matters. Please note that this document (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and (b) is not subject to any prohibition on dealing ahead of the dissemination or publication of investment research.

Any trading symbols displayed are for illustrative purposes only and are not intended to portray recommendations.