Analyze the dynamic path - difference equation, Mathematics

One of the well-known class of models that involve a simple difference equation are models of mean reversion. These models typically take the form

yt+1 - yt = -a(yt - μ)where 0 < a< 1

In the equation above μ is the mean of yt.

a) Provide the intuitive explanation for the above equation.

b) Show homogenous, particular and then general solution for the difference equation.

c) Setting t=0 show the solution to the mean-reversion model.

d) Analyze the dynamic path of this model.

Posted Date: 3/23/2013 3:31:25 AM | Location : United States







Related Discussions:- Analyze the dynamic path - difference equation, Assignment Help, Ask Question on Analyze the dynamic path - difference equation, Get Answer, Expert's Help, Analyze the dynamic path - difference equation Discussions

Write discussion on Analyze the dynamic path - difference equation
Your posts are moderated
Related Questions
Here we need to see the inverse of a matrix. Provided a square matrix, A, of size n x n if we can get the other matrix of similar size, B that, AB = BA = I n after that we call

How to solve this: log x(81) = 4


A passenger jet took 3 hours to fly 1800 km in the direction of the jetstream. The return trip against the jetstream took four hours. What was the jet's speed in still air and the

I need to make an assignment on this topic what should i write in it

What is a review technique? What are its advantages and disadvantages?

Recall also which value of the derivative at a specific value of t provides the slope of the tangent line to the graph of the function at that time, t. Thus, if for some time t the

How long does it take for an amount of money P to double itself if it is invested at 8% interest compounded 4 times a year?

In a frequency distribution mode is 7.88, mean is 8.32 find the median.  (Ans: 8.17) Ans:  Mode = 3 median - 2 mean 7.88 = 3 median - 2 x 8.32 7.88 +16.64 = 3 median

The Laplace method Laplace method employs all the information by assigning equal probabilities to the possible payoffs for every action and then selecting such alternative whic