Stochastic differential equation
Differential equations involving stochastic processes / From Wikipedia, the free encyclopedia
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A stochastic differential equation (SDE) is a differential equation in which one or more of the terms is a stochastic process,[1] resulting in a solution which is also a stochastic process. SDEs have many applications throughout pure mathematics and are used to model various behaviours of stochastic models such as stock prices,[2] random growth models[3] or physical systems that are subjected to thermal fluctuations.
SDEs have a random differential that is in the most basic case random white noise calculated as the derivative of a Brownian motion or more generally a semimartingale. However, other types of random behaviour are possible, such as jump processes like Lévy processes[4] or semimartingales with jumps. Random differential equations are conjugate to stochastic differential equations. Stochastic differential equations can also be extended to differential manifolds.[5][6][7][8]