What is stochastic differential equation and its need?

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 also a stochastic process. SDEs are used to model various phenomena such as stock prices or physical systems subject to thermal fluctuations.

1. What is the purpose of a differential equation?
2. Why differential equation is important in real life?
3. What is differential equation and its application?
4. What do I need to study stochastic calculus?

What is the purpose of a differential equation?

The derivatives of the function define the rate of change of a function at a point. It is mainly used in fields such as physics, engineering, biology and so on. The primary purpose of the differential equation is the study of solutions that satisfy the equations and the properties of the solutions.

Why differential equation is important in real life?

Differential equations have a remarkable ability to predict the world around us. They are used in a wide variety of disciplines, from biology, economics, physics, chemistry and engineering. They can describe exponential growth and decay, the population growth of species or the change in investment return over time.

What is differential equation and its application?

In mathematics, a differential equation is an equation that relates one or more unknown functions and their derivatives. In applications, the functions generally represent physical quantities, the derivatives represent their rates of change, and the differential equation defines a relationship between the two.

What do I need to study stochastic calculus?

What you need is a good foundation in probability, an understanding of stochastic processes (basic ones [markov chains, queues, renewals], what they are, what they look like, applications, markov properties), calculus 2-3 (Taylor expansions are the key) and basic differential equations.