What is stochastic modelling?

Stochastic modelling is a mathematical approach that incorporates randomness and uncertainty into models to predict and analyze complex systems or processes. Unlike deterministic models, which produce the same output for a given input, stochastic models use probability distributions to represent the likelihood of various outcomes. These models are widely used in fields such as finance, engineering, biology, and insurance to forecast events, assess risks, and make informed decisions under uncertainty. Stochastic modelling helps organizations better understand potential future scenarios and prepare for variability in real-world situations.