A stochastic differential equation (SDE) is a differential equation in which one or more of the terms is a stochastic process, resulting in a solution which is itself a stochastic process. SDE are used to model diverse phenomena such as fluctuating stock prices or physical system subject to thermal fluctuations. Typically, SDEs incorporate white noise which can be thought of as the derivative of Brownian motion (or the Wiener process); however, it should be mentioned that other types of random fluctuations are possible, such as jump processes.
Read more about Stochastic Differential Equation: Background, Use in Physics, Use in Probability and Mathematical Finance, Existence and Uniqueness of Solutions, See Also
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