The stochastic model

We have discussed the deterministic model, where a single outcome with quantitative input values has no randomness. The word stochastic is derived from the Greek word called Stochastikos. It means skillful at guessing or chance. The antonym of this is "certain", "deterministic", or "sure". A stochastic model predicts a set of possible outcomes weighted by their likelihoods or probabilities. For instance, a coin when flipped in the air will "surely" land on earth eventually, but whether it lands heads or tails is "random".

Monte Carlo simulation

Monte Carlo simulation, which is also viewed as a probability simulation, is a technique used to understand the impact of risk and uncertainty in any forecasting model. The Monte Carlo ...

Get Python: Data Analytics and Visualization now with O’Reilly online learning.

O’Reilly members experience live online training, plus books, videos, and digital content from 200+ publishers.