Applications of Markov Chain in Forecast

Abstract

The article is going to introduce Markov chain and its application into business. Two main daily life examples are applied for the explanation of this theory. In the Markov process, the probability of one state only depends on the next previous state. A mathematical model of market forecast and weather forecast is able to build through constructing transition probability matrix, analysising and computing with Markov chain. According to the data and calculation verification, we can see Markov Chain is a scientific, effective and convenient method for prediction and can be used for solving daily issues.