[R-SIG-Finance] Ornstein-Uhlenbeck

[Sarbo]

By half-life, do you mean the speed of mean-reversion?

If so, there's a bit of algebraic tomfoolery that's required to
discretise the equation and then fit the data to it. I don't have the
time right now to go into all the details but it's not hard- you can
parameterise the process using simple linear regression. If you need
help with that I'll try and get back to you tonight about it.

On Tue, 2010-10-12 at 13:47 +1100, Stephen Choularton wrote:

> Hi
> 
> Wonder if anyone could point me how I use this method to discover the
> half life of a mean reverting process.  
> 
> I am looking into pair trading and the time it takes for a
> cointegrated pair to revert to the norm.
> 
> -- 
> Stephen Choularton Ph.D., FIoD
> 
> 9999 2226
> 0413 545 182
> 
> 
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