Abstract
This chapter presents a generic model for price evolution with the Markov Chain Monte Carlo (MCMC) method. MCMC is a stochastic simulation process observed through a time where the probability distribution of the next stage of the process, given the current state, is independent of the past states. MCMC simulation model is governed by the initial state at time zero and a one-step transition probability matrix. Each row of this matrix shows the probability distribution of the next state, given the current state for that row. An additional model illustrates the evolution of prices over time. It assumes that there is an underlying process, such as the state of the economy, that follows an MCMC with three states. Then for any given state, the price change is simulated with a probability distribution with parameters that depend on the state. The presented model is generic and applicable to all prices.