The Halflife of Mean Reversion - Quant Researcher Interview Question
Difficulty: Hard
Category: time_series
Asked at: D.E. Shaw, Citadel, Two Sigma, WorldQuant, G-Research
Topics: mean-reversion, statistical-arbitrage, linear-regression, ornstein-uhlenbeck
Problem Description
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
Practice this hard researcher interview question on MyntBit - the all-in-one quant learning platform with 200+ quant interview questions for Jane Street, Citadel, Two Sigma, and other top quantitative finance firms.