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Study On The Evolution Of Some Financial Products Based On Markov Chains Method

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  • Marta Kovacs (Kiss)

    (The Bucharest University of Economic Studies, Faculty of Cybernetics, Statistics and Economic Informatics)

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.

Suggested Citation

  • Marta Kovacs (Kiss), 2016. "Study On The Evolution Of Some Financial Products Based On Markov Chains Method," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 1033-1039, July.
    • Handle: RePEc:ora:journl:v:1:y:2016:i:1:p:1033-1039
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    File URL: http://anale.steconomiceuoradea.ro/volume/2016/n1/102.pdf
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    References listed on IDEAS

    as
    1. Codruţa Dura, 2006. "The Use of Markov Chains in Marketing Forecasting," Annals of the University of Petrosani, Economics, University of Petrosani, Romania, vol. 6, pages 69-76.
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      Keywords

      Markov chains; transition probability matrix; the mean first passage times; financial products.;
      All these keywords.

      JEL classification:

      • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
      • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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