Minimizing risk of investment in capital market – A probabilistic approach

Earning money by investing in stock market is an attraction. The investment in stock market provides high returns, but as all of us heard higher the risk higher the gain. The quote stands good if studied reverse as well. Higher the gain; higher the risk. The investment in the market gives high returns in comparison to other investments in financial equities. Trading of options is a big business now days. The options are traded at a large in stock markets. If the price of stock can be guessed with certainty, the risk involved with the investment can be covered. Probability is one of the tools that can provide a helping hand for the problem. Probability transition matrix along with Markov analysis has been applied to estimate the stock price here. This can also help in valuing the options.