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Stochastic differential equations (SDEs) are another important area within stochastic
processes, combining differential calculus with probability theory. These equations
describe the evolution of random variables over time and have become a key tool in
fields such as physics, finance, and engineering. The famous Langevin equation in
physics, modeling the motion of particles in a fluid, is a stochastic differential equation.
In finance, SDEs are used to model asset prices and interest rates, enabling the
development of sophisticated models for risk management and portfolio optimization.
Stochastic processes also play a crucial role in the field of machine learning. Markov
Chain Monte Carlo (MCMC) methods, which utilize Markov processes, are employed
for sampling from complex probability distributions. These methods are particularly
useful in Bayesian statistics, allowing researchers to estimate posterior distributions
for model parameters. Additionally, reinforcement learning, a subfield of machine
learning, often utilizes Markov decision processes to model sequential decision-
making under uncertainty, as seen in applications ranging from robotics to game
playing.