Stochastic

Differential
Equations
This presentation will introduce you to stochastic differential equations,
explore their applications, and demonstrate numerical methods for
their solution. Join us on this exciting journey!
What are Stochastic
Processes?
1 Randomness 2 Predicting
and Variation Outcomes

A stochastic process is a Stochastic processes are

collection of random
variables that change over
time.
often used to model
systems with
unpredictable outcomes,
like weather patterns and
stock market trends.

3 Probability Distribution

Probability distribution is used to measure the likelihood of

different outcomes in a stochastic process.
What is a Brownian Motion?
Random Movement
A Brownian motion is a
mathematical model for the
random movement of particles in
a fluid.
Microscopic
Foundation
The Brownian motion explains
the random movement of small
particles, like pollen grains, in a
fluid.
Scale Effect
The random motion of bigger
particles in a fluid can be
approximated with a Brownian
motion model by adding a
stochastic force.
What is a Stochastic Differential
Equation?
1 2
Change over Time Continuous-Time
Model
A stochastic differential
equation describes how a Stochastic differential
process changes over time, equations are used in
taking into account random continuous-time models to
fluctuations. incorporate random
variations in an analytical
framework.
3
Statistical
Predictions
Stochastic differential
equations are also used to
make statistical predictions
about the behaviour of a
system over time, based on
past observations.
Applications of Stochastic
Differential Equations
Epidemiology
Stochastic differential equations
are used to model the spread of
infectious diseases and
pandemics like COVID-19, and to
evaluate control measures like
vaccination and quarantine.
Financial Modelling
Stochastic differential equations
are used to model stock market
fluctuations, and to design
investment strategies based on
risk assessment.
Climate Science
Stochastic differential equations
are used to simulate the
dynamics of weather patterns
and climate, and to make
predictions based on past data.
Numerical Methods for Solving
Stochastic Differential Equations
Variance
Reduction
Monte Carlo simulations with
variance reduction
techniques can be used to
solve stochastic differential
equations with high
accuracy.
Finite Difference Euler-Maruyama
Methods Method
Finite difference methods The Euler-Maruyama
can be used to discretize method is a numerical
stochastic differential scheme to solve stochastic
equations and generate differential equations by
solutions based on a time approximating the drift and
grid. diffusion coefficients with
truncated Taylor expansions.
Conclusion and Future Directions
Future Applications
New applications of stochastic
differential equations are emerging in
fields like data science, neuroscience,
genetics, and social science, promising
exciting new discoveries and insights.
1 Limitations and
Challenges
Although stochastic differential
2
equations are powerful tools for
modelling complex systems, they also
have some limitations and challenges,
like converging to the true solution,
handling singularities, and accounting
for boundary conditions.
3 Educational Resources
If you want to learn more about
stochastic differential equations, there
are many excellent online courses,
books, and research papers available,
catering for all levels of mathematical
sophistication.