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A Stochastic Analysis of Markov Chain Model in Finite State and Effects of Covariance Matrices on Nigerian Current Account Net for Capital Markets

Okoro, JC, Okpoye, OT and, Amadi, IU

Abstract

The solutions of stochastic and covariance matrices of Nigeria Current Account (NCA) which is an economic concept that measures a country’s transactions with the rest of the globe, is considered. Precise conditions are obtained which results shows as follows: the 3-steps probability transition matrices are found in each independent group which shows different NCA net movements, the group-D has the highest probability transition matrix, the covariance matrix solution to NCA net with their respective eigenvalues. A lot of price changes connote that policy measures to address current account imbalances; which is informative against investment plans. More so, the eigenvalues of the covariance matrices were effectively considered which can be used to create models that predict future values of NCA net based on historical patterns. Subsequently, other impacts of covariance matrix solutions were discussed for the purpose of this paper.

Keywords

Markov ChainCovariance MatrixTransition MatricesCapital market price and

References

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