> Seems like something that should be so easy to catch in a simulation/test
The system has two stable equilibria, one and zero. If we assume zero is virtually permanent, the system always ends there. But it's highly sensitive to a volatility assumption. Ex ante there is no way to precisely estimate that.
The system has two stable equilibria, one and zero. If we assume zero is virtually permanent, the system always ends there. But it's highly sensitive to a volatility assumption. Ex ante there is no way to precisely estimate that.