Stochastic: Difference between revisions
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Revision as of 11:42, 6 November 2022
The design of organisations and products
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Stochastic
/stəˈkæstɪk/ (adj.)
Of an event, to have a random probability distribution or pattern to which one may assign a probability but not predict precisely. To be compared with deterministic (where one can predict the event precisely) and uncertain where one cannot even assign a probability.
The outcome of rolling dice is stochastic: you know there are 36 possible outcomes, each of them is equally likely (1/36), but it is impossible to determine which will happen next time you roll the dice. Nonetheless you know the probability of a given outcome is 0.02777 recurring.
The price of a stock market index at close tomorrow is sort of stochastic, in that it must be a number and that number must be between zero and the total value of all issued currency in the world, but beyond that it is not possible to accurately assign a probability, as David “25-Sigma-Several Days-In-A-Row” Viniar would — probably? — tell you.