August 2013
Intermediate to advanced
382 pages
10h 23m
English
book
Fixed Income Relative Value Analysis: A Practitioners Guide to the Theory, Tools, and Trades
by Christian Schaller, Doug Huggins
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Chapter 2
Mean Reversion
What Is Mean Reversion and How Does It Help Us?
Mean reversion is one of the most fundamental concepts underpinning relative value analysis. But while mean reversion is widely understood at an intuitive level, surprisingly few analysts are familiar with the specific tools available for characterizing mean-reverting processes.
In this chapter, we discuss some of the key characteristics of mean-reverting processes and the mean reversion tools that can be used to identify attractive trading opportunities. In particular, we address:
- model selection;
- model estimation;
- calculating conditional expectations and probabilities;
- calculating ex ante risk-adjusted returns, particularly Sharpe ratios;
- calculating first passage times, ...
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O’Reilly covers everything we've got, with content to help us build a world-class technology community, upgrade the capabilities and competencies of our teams, and improve overall team performance as well as their engagement.Julian F.
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I'm always learning. So when I got on to O'Reilly, I was like a kid in a candy store. There are playlists. There are answers. There's on-demand training. It's worth its weight in gold, in terms of what it allows me to do.