Using the First Passage Times in Markov Chain model to support financial decisions on the stock exchange

Józef Stawicki ()
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Józef Stawicki: Nicolaus Copernicus University

Dynamic Econometric Models, 2016, vol. 16, 37-47

Abstract: The purpose of this article is to present the possibilities of using such a tool as Markov chain to analyse the dynamics of returns observed at the Warsaw Stock Exchange. Process analysis is the basis for decision-making with regard to the accepted horizon. Expected times for achieving specified states, understood as intervals of rates of return, in particular those describing negative rates of return, are extremely important. In this context, there is a possibility of determining easily the value at risk with the accepted probability.

Keywords: Markov chain; First passage times; Normal white noise; VaR (search for similar items in EconPapers)
JEL-codes: C58 F47 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:cpn:umkdem:v:16:y:2016:p:37-47

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