I have read about arithmetic and geometric random walks. What is the difference between them?

  • 2
    $\begingroup$ Take an arithmetic random walk. Exponentiate it. That's a geometric random walk. However, be careful, because some authors mean something quite different by the term geometric random walk (one example, assuming my quick glance didn't miss something important, is here) $\endgroup$ – Glen_b Dec 13 '13 at 3:04

Arithmetic random walks are modeled as sums of random terms while geometric random walks are modeled as products of random factors.

Two examples are Brownian Motion and Geometric Brownian Motion. Brownian Motion has independent, identically distributed increments while the geometric version has independent, identically distributed ratios between successive factors.


Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.