Stochastic Process

title: Stochastic Process

Stochastic Process

A Stochastic Process is basically a process which is non-deterministic. Note that it may have a probability distribution and may not be completely random. For instance the process where a 2-sided unfair coin is flipped again and again. Or for instance, direction a drop of water may take on a roughly plain surface (non-determinism here may arise due to occassional roughness which makes it hard to determine the path of the droplet).

Stochastic processes are widely used as mathematical models of systems and phenomena that appear to vary in a random manner. They have applications in many disciplines including the natural sciences such as biology, chemistry and physics as well as technology and engineering fields such as image processing, signal processing, information theory, computer science, cryptography and telecommunications. Furthermore, seemingly random changes in financial markets have motivated the extensive use of stochastic processes in finance.

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