STUDY ON THE EVOLUTION OF SOME FINANCIAL PRODUCTS BASED ON MARKOV CHAINS METHOD

Marta Kovacs (Kiss) ()
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Marta Kovacs (Kiss): The Bucharest University of Economic Studies, Faculty of Cybernetics, Statistics and Economic Informatics

Annals of Faculty of Economics, 2016, vol. 1, issue 1, 1033-1039

Abstract: In probability theory it is known that Markov chain is frequently used in order to predict the future situations. Moreover, Markov chain theory is used to study the change rules of the economic phenomenons, to describe consumers’ brand loyalty, in marketing for dynamic forecasts of market share, etc. In this study we introduced a Markov process model to track the evolution of some financial products for a commercial bank. At the same time we proposed a brief theory on related properties of Markov process based on which we continued the empirical research. Also, we used the mean first passage times, an another interesting and important long-term property of the Markov chain because they inform us about the steps that must be taken on average to move from one state to another.

Keywords: Markov chains; transition probability matrix; the mean first passage times; financial products. (search for similar items in EconPapers)
JEL-codes: C22 G21 (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:ora:journl:v:1:y:2016:i:1:p:1033-1039

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