>

>

> Hi, all,

>

> I'm looking for some model for financial prices that can incorporate random walk and mean reversion. possible candicates include geometric O-U process, the question is how to

> calibrate a geometric O-U process to historical data (I have seen the calibration of O-U, but it's not the same for geometric OU) ? the second question is when people model mean reversion, they sometimes fit O-U process to data , however, since most of financial time series are nonstationary (with unit root), how can it be possible to fit a stationary model like OU to nonstationary processes? in particular, when they estimate it, they simply regress delta Xt on Xt which is essentially a linear regression of a stationary process on nonstationary one, what is the rational for this? am I missing sth here?

>

> Thanks!

> Paul Jin

>

>

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