Exhibit 1

It is clear that the Treasury rate is continuous whereas the U.S. HPI rate is not. The latter seems to contain random jumps that occur around otherwise continuously changing mean levels. A diffusion + white noise pattern seems to resemble the dynamics of the HPI rate reasonably well. If we don’t trust our eyes, we can prove this fact by measuring empirical autocorrelation function of lag (Exhibit 2) and empirical standard deviation function of horizon (Exhibit 3).

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