A Mean-Reverting Jump Diffusion Process

initial value

4

jump intensity

6

volatility of continuous component

0.8

reversion parameter

1

mean jump size

0

standard deviation of jump size

1

duration

1

vertical range

10

randomize

This Demonstration shows a path of a mean-reverting jump diffusion process (with mean 0) with normally distributed jumps. Such processes can be used for modelling the logarithm of the price of a commodity such as gas, oil, etc. that is subject to irregular disruptions but tends to revert to the mean (the production cost of the commodity).