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Hard · time_series · Quant Researcher interview question · mean-reversion, statistical-arbitrage, linear-regression, ornstein-uhlenbeck
The Ornstein-Uhlenbeck (OU) process is a stochastic differential equation widely used in quantitative finance to model mean-reverting time series, particularly for determining entry and exit points in pairs trading strategies. By estimating the speed of mean reversion from historical price data, analysts can calculate the half-life, which represents the expected time for a price series to return halfway to its long-term mean after a deviation. Task Calculate the half-life of a mean-reverting ti