OU Half-Life

Problem

Estimate the half-life of mean reversion for a process whose spread follows an AR(1) with coefficient phi: half_life = -ln(2) / ln(phi).

Return 0.0 when phi is not strictly between 0 and 1, since the spread either does not mean-revert or does not exist.

Hint

The closer phi is to 1, the slower the reversion and the longer the half-life.

case 1

in: [0.9]

expected: 6.578813478960585

case 2

in: [0.5]

expected: 1

case 3

in: [0.99]

expected: 68.96756393652842

case 4

in: [1]

expected: 0

Starter codePython

import math
def ou_half_life(phi):
    # Your code here
    pass

4 test cases · run your code against them in the editor