A slowly reverting MRP with a shifting trend makes it difficult to distinguish between a random walk and a mean reverting process.
Usually, commodity prices are modelled as a mean reverting process, since the prices tend to revert to their long run marginal costs of production.
The selected parameters were used to develop stochastic process models using Ito process and mean reverting process for feed composition and kinetic parameter uncertainty.
Hence, prices of distillate fuels and LNG are supposed to follow mean-reverting processes in our study, which is bolstered by Li (2007), who argues that over time, the process of fuel prices tends to drift towards its long-term mean: such a process is called mean-reverting.
Two common forms of such processes are the Geometric Brownian Motion with drift and the Ornstein-Uhlenbeck mean-reverting process.
As an example, we show that the correlation model of van Emmerich can be obtained by transforming the special mean-reverting process (12), i.e. the van Emmerich's correlation process is just a special case of the general transformation [12].
Repealing the Act would only mean reverting to that cumbersome and expensive process.
Figure 5 shows that prices are slightly mean reverting with low λ. Figure 5 Results of simulation with Ornstein-Uhlenbeck process of RSS3: (a) Results of simulation with Ornstein-Uhlenbeck process of RSS3 with least squares regression (lambda= 0.7434).
If we reject the hypothesis and b is in the interval 0 < b < 1 it means that we have an autoregressive process, which tends to revert to its long-run mean value, and is therefore equivalent to a <span class="lh">mean reverting model in continuous time.
Moreover, theoretical considerations suggest that the price series should exhibit mean reverting behaviour.
There are some important characteristics of commodity price; for example, spot and future prices are mean reverting [4].
