What is "stochastic differential equation"

n. (context calculus English) a type of differential equation in which one or more of the terms is a stochastic process resulting in a solution which is itself a stochastic process

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 unstable stock prices or physical systems subject to thermal fluctuations. Typically, SDEs contain a variable which represents random white noise calculated as the derivative of Brownian motion or the Wiener process. However, other types of random behaviour are possible, such as jump processes.