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Stochastic process
       
 
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Stochastic process

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Stochastic process
Formally, a process that can be described by the evolution of some random variable over some parameter, which may be either discrete or continuous. Geometric Brownian motion is an example of a stochastic process parameterised by time. Stochastic processes are used in finance to develop models of the Future price of an instrument in terms of the Spot price and some random variable; or analogously, the Future value of an Interest or foreign Exchange rate.

See also Geometric Brownian motion, Martingale, Random walk
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