# Tagged Questions

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### Why is OU process stationary?

The mean and variance of OU process have time dependence (exponentially decay in time). So they are not constant in time. How can it to be stationary?
165 views

### Getting the next price of a GBM with reversion

Here is the "twin" question of Getting the next price of a GBM (Geometric Brownian Motion) but for GBM with reversion As in that case, I'd like to write a formula for the next price, as function of: ...
263 views

### Why is the mean time-dependent in the Hull-White interest rate model?

In the Vasicek interest-rate model, the interest rate reverts to a constant mean. This makes sense to me. In my conception, the mean ought to be time-invariant, since interest rates don't follow an ...
123 views

### Exact value of mean reversion rate knowing terminal value of the process

Let you have the following mean reverting process: $\text{d}x_{t}=a(\theta-x_{t})\text{d}t$, where the diffusion term is absent, that is this process is not stochastic. Let you know the value of ...
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I have constructed a mean reverting spread using two indexes. I know they have to be mean reverting, but when plotted side by side they are mean reverting for a little bit and then deviate and head ...
512 views

### Statistical significance of a pair trading strategy

How can I test the significance of a pair trading strategy, i.e. that the H0 is "The strategy has no predicting power". I was considering to use the technique in Evidence Based Technical Analysis ...
839 views

### Threshold calculation for buying a mean-reverting asset

I am trying to figure-out an optimal policy for buying a unit when its price follows a mean-reverting price process (Ornsteinâ€“Uhlenbeck), when I have a finite time deadline for buying the unit. I ...
1k views

### Does mean reverting imply mean stationary?

If I have a time series that exhibits mean reverting properties, does it necessarily mean that the time series is mean stationary?
3k views

### How to build a mean reverting basket?

I have been playing with mean reverting pairs, but seems that most of the low hanging fruit (ie pairs) have been squeezed already. I would like to start with mean reverting baskets (>2 securities) in ...
447 views

### Entry and exit points for very short mean-reverting timeseries

I have a model specifying a cointegration relationship on a number of transaction-level timeseries. I would like to specify entry and exit points for trades where these points ideally would be just ...
1k views

### How are momentum and reversion long/short strategies dynamically combined in trading?

I'm trying to understand how to combine two strategies dynamically in trading: one mean-reversion and the other momentum. One way (also the simplest one) of doing this is by scaling/normalizing ...
561 views

### Two prices pass the cointegration test but there is a trend. How to check stationarity?

Below is a spread built with two ETFs that pass the cointegration test i.e. Adjusted Dickey Fuller, adfTest(type="nc") in R's fUnitRoots with a p-value < 0.01. The red line is the trendline. What ...
926 views

### How is mean reversion implied by different valuations of Bermudan swaptions?

Someone told me that mean reversion can be implied by the different valuations of bermudan swaptions when using different methods for volatility calibration. Does anyone know what this means?
3k views

### R code for Ornstein-Uhlenbeck process

Can any one help me with some R code to run Ornstein-Uhlenbeck process?