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Markov Processes for Finance Explained

In this video from Derivatives and Risk Education, we break down Markov processes — a cornerstone of stochastic modeling in finance. You’ll learn what it means for a process to be “memoryless,” how this differs from martingales, and why the Markov property is so powerful in simplifying derivative pricing and dynamic programming. We walk through the binomial coin toss model, show why the stock price process is Markov, and explain why the maximum‑to‑date process alone is not Markov — but becomes Markov when paired with the stock price. These insights connect directly to option pricing, hedging strategies, and the foundations of models like Black‑Scholes. Whether you’re preparing for interviews, studying financial mathematics, or deepening your quant finance knowledge, this video gives you the clarity and intuition you need. #QuantFinance #MarkovProcesses #DerivativePricing #FinancialMathematics #RiskManagement #BinomialModel