Stochastic models

Stochastic models

Liability-matching models that assume that the liability payments and the asset cash flows are uncertain. Related: Deterministic models.

Stochastic Modeling

Any of several methods for measuring the probability of distribution of a random variable. That is, a stochastic model measures the likelihood that a variable will equal any of a universe of amounts. It is used in technical analysis to predict market movements. Insurance companies also use stochastic modeling to estimate their assets and liabilities because, due to the nature of the insurance business, these are not known quantities.