Risk glossary


Mean reversion

A tendency for a stochastic process to revert over time to an equilibrium level, such as the average (the mean) of historical prices, or some other variable. Interest rates, stock returns, price-earning ratios, and implied volatilities tend to exhibit mean reversion. The concept of mean reversion has been much discussed in energy markets with reference to how to best model forward prices in markets such as deregulated power.

  • LinkedIn  
  • Save this article
  • Print this page  

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here: