Random Walk and Drift

[archived_user]

In quants, we speak about random walk with drift and that if we have a drift, b0 is different than 0, but what exactly is the drift supposed to mean?

 

[archived_user]

It means that b0 ≠ 0.
Literally, that’s the definition of drift.
Tomorrow’s value is expected to be larger than today’s.
Or, tomorrow’s value is expected to be smaller than today’s.

 

[archived_user]

thanks magician

 

[archived_user]

You’re welcome.