Easy · Stochastic Processes & Markov Chains · Numerical · ~5 min · #24
Regime-Switching Stationary Distribution
A market alternates between a calm regime and a volatile regime, modelled as a Markov chain observed daily. From calm, it switches to volatile with probability 0.3; from volatile, it switches back to calm with probability 0.1.
In the long run, what fraction of days are calm?
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