Markov Chains in Finance
In this project, the binomial and trinomial asset pricing models were investigated. The calibration of the model parameters was done by different methods, in particular Cox-Ross-Rubinstein, Jarrow-Rudd, Desmond John Higham. One application of these models is the evaluation of options and obligations. Two methods to price options were implemented: Monte-Carlo Markov Chain method and another method that is implemented by Dynamic Programming. The project was implemented in Matlab.
