Markets: A Rigorous Course

M13 · Problem 11 ★ Check

Ergodic probabilities and durations

(a) Derive (13.26) and the expected duration 1/(1−pjj)1/(1-p_{jj}). (b) For p00=0.98p_{00} = 0.98, p11=0.95p_{11} = 0.95, give the ergodic probabilities, the expected durations, and the probability that a stressed spell, once started, lasts at least 40 further days.

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Commas, ₹, % and 1e-3 notation are accepted.

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