medium · Quantitative Finance microstructure-arb
If two assets are cointegrated, the spread is stationary. If the spread is modeled as x_t = φ x_t-1 + ε_t, what is the condition on φ for the spread to have a finite, positive half-life?
- 0 < φ < 1
- Φ < 0
- Φ > 1
- Φ = 1
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