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# Finance Dictionary - S Terms

# Stochastic Process

An equation describing the probabilistic behavior of a stochastic variable is called stochastic process. Stochastic processes can be classified as discrete time or continuous time. A discrete-time stochastic process is one where the value of the variable can change only at certain fixed points in time, whereas a continuous-time stochastic process is one where changes can take place at any time. Stochastic processes can also be classified as continuous variable or discrete variable. In a continuous-variable process, the underlying variable can take any value within a certain range, whereas in a discretevariable process, only certain discrete values are possible.