Stochastic process

45 languages
Article
Talk
Read
Edit
View history
Tools
Appearance hide

Text
Small
Standard
Large
Width
Standard
Wide
Color (beta)
Automatic
Light
Dark
Report an issue with dark mode
From Wikipedia, the free encyclopedia

Part of a series on statistics

Probability theory
● Probability
● Axioms
● Determinism
● System
● Indeterminism
● Randomness

● Probability space
● Sample space
● Event
● Collectively exhaustive events
● Elementary event
● Mutual exclusivity
● Outcome
● Singleton
● Experiment
● Bernoulli trial
● Probability distribution
● Bernoulli distribution
● Binomial distribution
● Exponential distribution
● Normal distribution
● Pareto distribution
● Poisson distribution
● Probability measure
● Random variable
● Bernoulli process
● Continuous or discrete
● Expected value
● Variance
● Markov chain
● Observed value
● Random walk
● Stochastic process

● Complementary event
● Joint probability
● Marginal probability
● Conditional probability

● Independence
● Conditional independence
● Law of total probability
● Law of large numbers
● Bayes' theorem
 ● Boole's inequality

● Venn diagram
● Tree diagram

● V
● T
● E

A computer-simulated realization of a Wiener or Brownian motion process on the surface of a

sphere. The Wiener process is widely considered the most studied and central stochastic
[1][2][3]
process in probability theory.

In probability theory and related fields, a stochastic (/stəˈkæstɪk/) or random process

is a mathematical object usually defined as a sequence of random variables in a
probability space, where the index of the sequence often has the interpretation of time.
Stochastic processes are widely used as mathematical models of systems and
phenomena that appear to vary in a random manner. Examples include the growth of a
bacterial population, an electrical current fluctuating due to thermal noise, or the
[1][4][5]
movement of a gas molecule. Stochastic processes have applications in many
[6] [7] [8] [9] [10]
disciplines such as biology, chemistry, ecology, neuroscience, physics,
[11] [12] [13]
image processing, signal processing, control theory, information theory,
[14] [15]
computer science, and telecommunications. Furthermore, seemingly random
changes in financial markets have motivated the extensive use of stochastic processes
[16][17][18]
in finance.

Applications and the study of phenomena have in turn inspired the proposal of new
stochastic processes. Examples of such stochastic processes include the Wiener
 [a]
process or Brownian motion process, used by Louis Bachelier to study price changes
[21]
on the Paris Bourse, and the Poisson process, used by A. K. Erlang to study the
[22]
number of phone calls occurring in a certain period of time. These two stochastic
processes are considered the most important and central in the theory of stochastic
[1][4][23]
processes, and were invented repeatedly and independently, both before and
[21][24]
after Bachelier and Erlang, in different settings and countries.

[25]
The term random function is also used to refer to a stochastic or random process,
[26]
because a stochastic process can also be interpreted as a random element in a
[27][28]
function space. The terms stochastic process and random process are used
interchangeably, often with no specific mathematical space for the set that indexes the
[27][29]
random variables. But often these two terms are used when the random variables
[5][29]
are indexed by the integers or an interval of the real line. If the random variables
are indexed by the Cartesian plane or some higher-dimensional Euclidean space, then
[5][30]
the collection of random variables is usually called a random field instead. The
values of a stochastic process are not always numbers and can be vectors or other
[5][28]
mathematical objects.

Based on their mathematical properties, stochastic processes can be grouped into

[31] [32]
various categories, which include random walks, martingales, Markov processes,
[33] [34] [35] [36]
Lévy processes, Gaussian processes, random fields, renewal processes,
[37]
and branching processes. The study of stochastic processes uses mathematical
knowledge and techniques from probability, calculus, linear algebra, set theory, and
[38][39][40]
topology as well as branches of mathematical analysis such as real analysis,
[41][42][43]
measure theory, Fourier analysis, and functional analysis. The theory of
[44]
stochastic processes is considered to be an important contribution to mathematics
and it continues to be an active topic of research for both theoretical reasons and
[45][46][47]
applications.

Introduction[edit]
A stochastic or random process can be defined as a collection of random variables that
is indexed by some mathematical set, meaning that each random variable of the
[4][5]
stochastic process is uniquely associated with an element in the set. The set used
to index the random variables is called the index set. Historically, the index set was
some subset of the real line, such as the natural numbers, giving the index set the
[1]
interpretation of time. Each random variable in the collection takes values from the
same mathematical space known as the state space. This state space can be, for
example, the integers, the real line or

[1][5]
-dimensional Euclidean space. An increment is the amount that a stochastic
[48]
process changes between two index values, often interpreted as two points in time.
[49]
A stochastic process can have many outcomes, due to its randomness, and a single
outcome of a stochastic process is called, among other names, a sample function or
[28][50]
realization.

A single computer-simulated sample function or realization, among other terms, of a three-

dimensional Wiener or Brownian motion process for time 0 ≤ t ≤ 2. The index set of this stochastic process
is the non-negative numbers, while its state space is three-dimensional Euclidean space.

Classifications[edit]

A stochastic process can be classified in different ways, for example, by its state space,
its index set, or the dependence among the random variables. One common way of
[51][52][53]
classification is by the cardinality of the index set and the state space.

When interpreted as time, if the index set of a stochastic process has a finite or
countable number of elements, such as a finite set of numbers, the set of integers, or
[54][55]
the natural numbers, then the stochastic process is said to be in discrete time. If
the index set is some interval of the real line, then time is said to be continuous. The
two types of stochastic processes are respectively referred to as discrete-time and
[48][56][57]
continuous-time stochastic processes. Discrete-time stochastic processes
are considered easier to study because continuous-time processes require more
advanced mathematical techniques and knowledge, particularly due to the index set
[58][59]
being uncountable. If the index set is the integers, or some subset of them, then
[55]
the stochastic process can also be called a random sequence.

If the state space is the integers or natural numbers, then the stochastic process is
called a discrete or integer-valued stochastic process. If the state space is the real
line, then the stochastic process is referred to as a real-valued stochastic process or
a process with continuous state space. If the state space is

-dimensional Euclidean space, then the stochastic process is called a

-dimensional vector process or

[51][52]
-vector process.

Etymology[edit]

The word stochastic in English was originally used as an adjective with the definition
"pertaining to conjecturing", and stemming from a Greek word meaning "to aim at a
mark, guess", and the Oxford English Dictionary gives the year 1662 as its earliest
[60]
occurrence. In his work on probability Ars Conjectandi, originally published in Latin in
1713, Jakob Bernoulli used the phrase "Ars Conjectandi sive Stochastice", which has
[61]
been translated to "the art of conjecturing or stochastics". This phrase was used, with
[62]
reference to Bernoulli, by Ladislaus Bortkiewicz who in 1917 wrote in German the
word stochastik with a sense meaning random. The term stochastic process first
[60]
appeared in English in a 1934 paper by Joseph Doob. For the term and a specific
mathematical definition, Doob cited another 1934 paper, where the term stochastischer
[63][64]
Prozeß was used in German by Aleksandr Khinchin, though the German term had
[65]
been used earlier, for example, by Andrei Kolmogorov in 1931.

According to the Oxford English Dictionary, early occurrences of the word random in
English with its current meaning, which relates to chance or luck, date back to the 16th
century, while earlier recorded usages started in the 14th century as a noun meaning
"impetuosity, great speed, force, or violence (in riding, running, striking, etc.)". The word
itself comes from a Middle French word meaning "speed, haste", and it is probably
derived from a French verb meaning "to run" or "to gallop". The first written appearance
of the term random process pre-dates stochastic process, which the Oxford English
Dictionary also gives as a synonym, and was used in an article by Francis Edgeworth
[66]
published in 1888.

Terminology[edit]

[67]
The definition of a stochastic process varies, but a stochastic process is traditionally
[68][69]
defined as a collection of random variables indexed by some set. The terms
random process and stochastic process are considered synonyms and are used
[27][29][30][70][71][72]
interchangeably, without the index set being precisely specified. Both
[28][70] [4][73]
"collection", or "family" are used while instead of "index set", sometimes the
[28] [30]
terms "parameter set" or "parameter space" are used.

[5][74]
The term random function is also used to refer to a stochastic or random process,
[75] [28]
though sometimes it is only used when the stochastic process takes real values.
[73]
This term is also used when the index sets are mathematical spaces other than the
[5][76]
real line, while the terms stochastic process and random process are usually used
[5][76][77]
when the index set is interpreted as time, and other terms are used such as
random field when the index set is

-dimensional Euclidean space

𝑅𝑛

[5][28][30]
or a manifold.

Notation[edit]

A stochastic process can be denoted, among other ways, by

{𝑋(𝑡)}𝑡∈𝑇
 [56]
,

{𝑋𝑡}𝑡∈𝑇

[69]
,

{𝑋𝑡}

[78]

{𝑋(𝑡)}

or simply as

. Some authors mistakenly write

𝑋(𝑡)

[79]
even though it is an abuse of function notation. For example,

𝑋(𝑡)

or

𝑋𝑡

are used to refer to the random variable with the index

[78]
, and not the entire stochastic process. If the index set is

𝑇=[0,∞)
 , then one can write, for example,

(𝑋𝑡,𝑡≥0)

[29]
to denote the stochastic process.

Examples[edit]
Bernoulli process[edit]

Main article: Bernoulli process

[80]
One of the simplest stochastic processes is the Bernoulli process, which is a
sequence of independent and identically distributed (iid) random variables, where each
random variable takes either the value one or zero, say one with probability

and zero with probability

1−𝑝

. This process can be linked to an idealisation of repeatedly flipping a coin, where

the probability of obtaining a head is taken to be

[81]
and its value is one, while the value of a tail is zero. In other words, a Bernoulli
[82]
process is a sequence of iid Bernoulli random variables, where each idealised coin
[83]
flip is an example of a Bernoulli trial.

Random walk[edit]

Main article: Random walk

Random walks are stochastic processes that are usually defined as sums of iid random
variables or random vectors in Euclidean space, so they are processes that change in
[84][85][86][87][88]
discrete time. But some also use the term to refer to processes that
[89]
change in continuous time, particularly the Wiener process used in financial models,
[90]
which has led to some confusion, resulting in its criticism. There are other various
types of random walks, defined so their state spaces can be other mathematical
objects, such as lattices and groups, and in general they are highly studied and have
[89][91]
many applications in different disciplines.

A classic example of a random walk is known as the simple random walk, which is a
stochastic process in discrete time with the integers as the state space, and is based on
a Bernoulli process, where each Bernoulli variable takes either the value positive one or
negative one. In other words, the simple random walk takes place on the integers, and
its value increases by one with probability, say,

, or decreases by one with probability

1−𝑝

, so the index set of this random walk is the natural numbers, while its state space
is the integers. If

𝑝=0.5

[92][93]
, this random walk is called a symmetric random walk.

Wiener process[edit]

Main article: Wiener process

The Wiener process is a stochastic process with stationary and independent increments
[2][94]
that are normally distributed based on the size of the increments. The Wiener
process is named after Norbert Wiener, who proved its mathematical existence, but the
process is also called the Brownian motion process or just Brownian motion due to its
[95][96][97]
historical connection as a model for Brownian movement in liquids.
 Realizations of Wiener processes (or Brownian motion processes) with drift (blue) and without
drift (red)

Playing a central role in the theory of probability, the Wiener process is often considered
the most important and studied stochastic process, with connections to other stochastic
[1][2][3][98][99][100][101]
processes. Its index set and state space are the non-negative
numbers and real numbers, respectively, so it has both continuous index set and states
[102]
space. But the process can be defined more generally so its state space can be

[91][99][103]
-dimensional Euclidean space. If the mean of any increment is zero, then the
resulting Wiener or Brownian motion process is said to have zero drift. If the mean of
the increment for any two points in time is equal to the time difference multiplied by
some constant

, which is a real number, then the resulting stochastic process is said to have drift

[104][105][106]
.

Almost surely, a sample path of a Wiener process is continuous everywhere but

nowhere differentiable. It can be considered as a continuous version of the simple
[49][105]
random walk. The process arises as the mathematical limit of other stochastic
[107][108]
processes such as certain random walks rescaled, which is the subject of
Donsker's theorem or invariance principle, also known as the functional central limit
[109][110][111]
theorem.
The Wiener process is a member of some important families of stochastic processes,
[2][49]
including Markov processes, Lévy processes and Gaussian processes. The
process also has many applications and is the main stochastic process used in
[112][113] [114][115]
stochastic calculus. It plays a central role in quantitative finance, where it
[116]
is used, for example, in the Black–Scholes–Merton model. The process is also used
in different fields, including the majority of natural sciences as well as some branches of
[3][117][118]
social sciences, as a mathematical model for various random phenomena.

Poisson process[edit]

Main article: Poisson process

[119]
The Poisson process is a stochastic process that has different forms and definitions.
[120]
It can be defined as a counting process, which is a stochastic process that
represents the random number of points or events up to some time. The number of
points of the process that are located in the interval from zero to some given time is a
Poisson random variable that depends on that time and some parameter. This process
has the natural numbers as its state space and the non-negative numbers as its index
set. This process is also called the Poisson counting process, since it can be interpreted
[119]
as an example of a counting process.

If a Poisson process is defined with a single positive constant, then the process is called
[119][121]
a homogeneous Poisson process. The homogeneous Poisson process is a
member of important classes of stochastic processes such as Markov processes and
[49]
Lévy processes.

The homogeneous Poisson process can be defined and generalized in different ways. It
can be defined such that its index set is the real line, and this stochastic process is also
[122][123]
called the stationary Poisson process. If the parameter constant of the Poisson
process is replaced with some non-negative integrable function of

, the resulting process is called an inhomogeneous or nonhomogeneous Poisson

[124]
process, where the average density of points of the process is no longer constant.
Serving as a fundamental process in queueing theory, the Poisson process is an
important process for mathematical models, where it finds applications for models of
[125][126]
events randomly occurring in certain time windows.
Defined on the real line, the Poisson process can be interpreted as a stochastic
[49][127] [128][129]
process, among other random objects. But then it can be defined on the

[130]
-dimensional Euclidean space or other mathematical spaces, where it is often
interpreted as a random set or a random counting measure, instead of a stochastic
[128][129]
process. In this setting, the Poisson process, also called the Poisson point
process, is one of the most important objects in probability theory, both for applications
[22][131]
and theoretical reasons. But it has been remarked that the Poisson process does
not receive as much attention as it should, partly due to it often being considered just on
[131][132]
the real line, and not on other mathematical spaces.

Definitions[edit]
Stochastic process[edit]

A stochastic process is defined as a collection of random variables defined on a

common probability space

(Ω,𝐹,𝑃)

, where

is a sample space,

is a

-algebra, and
𝑃

is a probability measure; and the random variables, indexed by some set

, all take values in the same mathematical space

, which must be measurable with respect to some

-algebra

[28]
.

In other words, for a given probability space

(Ω,𝐹,𝑃)

and a measurable space

(𝑆,Σ)

, a stochastic process is a collection of

[80]
-valued random variables, which can be written as:

{𝑋(𝑡):𝑡∈𝑇}.
Historically, in many problems from the natural sciences a point

𝑡∈𝑇

had the meaning of time, so

𝑋(𝑡)

is a random variable representing a value observed at time

[133]
. A stochastic process can also be written as

{𝑋(𝑡,𝜔):𝑡∈𝑇}

to reflect that it is actually a function of two variables,

𝑡∈𝑇

and

𝜔∈Ω

[28][134]
.

There are other ways to consider a stochastic process, with the above definition being
[68][69]
considered the traditional one. For example, a stochastic process can be
interpreted or defined as a

𝑆𝑇

-valued random variable, where

𝑆𝑇

is the space of all the possible functions from the set

𝑇

into the space

[27][68]
. However this alternative definition as a "function-valued random variable" in
[135]
general requires additional regularity assumptions to be well-defined.

Index set[edit]

The set

[4][51] [28][136]
is called the index set or parameter set of the stochastic process. Often
this set is some subset of the real line, such as the natural numbers or an interval,
giving the set

[1]
the interpretation of time. In addition to these sets, the index set

[1][54]
can be another set with a total order or a more general set, such as the
Cartesian plane

𝑅2

or

-dimensional Euclidean space, where an element

𝑡∈𝑇
 [48][137]
can represent a point in space. That said, many results and theorems are
[138]
only possible for stochastic processes with a totally ordered index set.

State space[edit]

The mathematical space

of a stochastic process is called its state space. This mathematical space can be
defined using integers, real lines,

-dimensional Euclidean spaces, complex planes, or more abstract mathematical

spaces. The state space is defined using elements that reflect the different values that
[1][5][28][51][56]
the stochastic process can take.

Sample function[edit]

A sample function is a single outcome of a stochastic process, so it is formed by taking

[28][139]
a single possible value of each random variable of the stochastic process. More
precisely, if

{𝑋(𝑡,𝜔):𝑡∈𝑇}

is a stochastic process, then for any point

𝜔∈Ω

, the mapping

𝑋(⋅,𝜔):𝑇→𝑆,

is called a sample function, a realization, or, particularly when

𝑇

is interpreted as time, a sample path of the stochastic process

{𝑋(𝑡,𝜔):𝑡∈𝑇}

[50]
. This means that for a fixed

𝜔∈Ω

, there exists a sample function that maps the index set

to the state space

[28]
. Other names for a sample function of a stochastic process include trajectory,
[140] [141]
path function or path.

Increment[edit]

An increment of a stochastic process is the difference between two random variables

of the same stochastic process. For a stochastic process with an index set that can be
interpreted as time, an increment is how much the stochastic process changes over a
certain time period. For example, if

{𝑋(𝑡):𝑡∈𝑇}

is a stochastic process with state space

and index set

𝑇=[0,∞)
 , then for any two non-negative numbers

𝑡1∈[0,∞)

and

𝑡2∈[0,∞)

such that

𝑡1≤𝑡2

, the difference

𝑋𝑡2−𝑋𝑡1

is a

[48][49]
-valued random variable known as an increment. When interested in the
increments, often the state space

is the real line or the natural numbers, but it can be

[49]
-dimensional Euclidean space or more abstract spaces such as Banach spaces.

Further definitions[edit]

Law[edit]

For a stochastic process

𝑋:Ω→𝑆𝑇

defined on the probability space

(Ω,𝐹,𝑃)

, the law of stochastic process

is defined as the image measure:

𝜇=𝑃∘𝑋−1,

where

is a probability measure, the symbol

denotes function composition and

𝑋−1

is the pre-image of the measurable function or, equivalently, the

𝑆𝑇

-valued random variable

, where
𝑆𝑇

is the space of all the possible

-valued functions of

𝑡∈𝑇

[27][68][142][143]
, so the law of a stochastic process is a probability measure.

For a measurable subset

of

𝑆𝑇

, the pre-image of

gives

𝑋−1(𝐵)={𝜔∈Ω:𝑋(𝜔)∈𝐵},

so the law of a

[28]
can be written as:

𝜇(𝐵)=𝑃({𝜔∈Ω:𝑋(𝜔)∈𝐵}).
The law of a stochastic process or a random variable is also called the probability law,
[133][142][144][145][146]
probability distribution, or the distribution.

Finite-dimensional probability distributions [edit]

Main article: Finite-dimensional distribution

For a stochastic process

with law

, its finite-dimensional distribution for

𝑡1,…,𝑡𝑛∈𝑇

is defined as:

𝜇𝑡1,…,𝑡𝑛=𝑃∘(𝑋(𝑡1),…,𝑋(𝑡𝑛))−1,

This measure

𝜇𝑡1,..,𝑡𝑛

is the joint distribution of the random vector

(𝑋(𝑡1),…,𝑋(𝑡𝑛))

; it can be viewed as a "projection" of the law

onto a finite subset of

𝑇

[27][147]
.

For any measurable subset

of the

-fold Cartesian power

𝑆𝑛=𝑆×⋯×𝑆

, the finite-dimensional distributions of a stochastic process

[28]
can be written as:

𝜇𝑡1,…,𝑡𝑛(𝐶)=𝑃({𝜔∈Ω:(𝑋𝑡1(𝜔),…,𝑋𝑡𝑛(𝜔))∈𝐶}).

The finite-dimensional distributions of a stochastic process satisfy two mathematical

[57]
conditions known as consistency conditions.

Stationarity[edit]

Main article: Stationary process

Stationarity is a mathematical property that a stochastic process has when all the
random variables of that stochastic process are identically distributed. In other words, if

𝑋
 is a stationary stochastic process, then for any

𝑡∈𝑇

the random variable

𝑋𝑡

has the same distribution, which means that for any set of

index set values

𝑡1,…,𝑡𝑛

, the corresponding

random variables

𝑋𝑡1,…𝑋𝑡𝑛,

all have the same probability distribution. The index set of a stationary stochastic
[148][149]
process is usually interpreted as time, so it can be the integers or the real line.
But the concept of stationarity also exists for point processes and random fields, where
[148][150][151]
the index set is not interpreted as time.

When the index set

can be interpreted as time, a stochastic process is said to be stationary if its finite-

dimensional distributions are invariant under translations of time. This type of stochastic
process can be used to describe a physical system that is in steady state, but still
[148]
experiences random fluctuations. The intuition behind stationarity is that as time
 [152]
passes the distribution of the stationary stochastic process remains the same. A
sequence of random variables forms a stationary stochastic process only if the random
[148]
variables are identically distributed.

A stochastic process with the above definition of stationarity is sometimes said to be

strictly stationary, but there are other forms of stationarity. One example is when a
discrete-time or continuous-time stochastic process

is said to be stationary in the wide sense, then the process

has a finite second moment for all

𝑡∈𝑇

and the covariance of the two random variables

𝑋𝑡

and

𝑋𝑡+ℎ

depends only on the number

for all

𝑡∈𝑇

[152][153]
. Khinchin introduced the related concept of stationarity in the wide
sense, which has other names including covariance stationarity or stationarity in the
[153][154]
broad sense.
Filtration[edit]

A filtration is an increasing sequence of sigma-algebras defined in relation to some

probability space and an index set that has some total order relation, such as in the
case of the index set being some subset of the real numbers. More formally, if a
stochastic process has an index set with a total order, then a filtration

{𝐹𝑡}𝑡∈𝑇

, on a probability space

(Ω,𝐹,𝑃)

is a family of sigma-algebras such that

𝐹𝑠⊆𝐹𝑡⊆𝐹

for all

𝑠≤𝑡

, where

𝑡,𝑠∈𝑇

and

denotes the total order of the index set

[51]
. With the concept of a filtration, it is possible to study the amount of information
contained in a stochastic pro