Stochastic Differential Equation

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 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.
Random differential equations are conjugate to stochastic differential equations.

Background

Stochastic differential equations originated in the theory of Brownian motion, in the work of Albert Einstein and Smoluchowski. These early examples were linear stochastic differential equations, also called 'Langevin' equations after French physicist Langevin, describing the motion of a harmonic oscillator subject to a random force.
The mathematical theory of stochastic differential equations was developed in the 1940s through the groundbreaking work of Japanese mathematician Kiyosi Itô, who introduced the concept of stochastic integral and initiated the study of nonlinear stochastic differential equations. Another approach was later proposed by Russian physicist Stratonovich, leading to a calculus similar to ordinary calculus.

Terminology

The most common form of SDEs in the literature is an ordinary differential equation with the right hand side perturbed by a term dependent on a white noise variable. In most cases, SDEs are understood as continuous time limit of the corresponding stochastic difference equations. This understanding of SDEs is ambiguous and must be complemented by a proper mathematical definition of the corresponding integral. Such a mathematical definition was first proposed by Kiyosi Itô in the 1940s, leading to what is known today as the Itô calculus.
Another construction was later proposed by Russian physicist Stratonovich,
leading to what is known as the Stratonovich integral.
The Itô integral and Stratonovich integral are related, but different, objects and the choice between them depends on the application considered. The Itô calculus is based on the concept of non-anticipativeness or causality, which is natural in applications where the variable is time.
The Stratonovich calculus, on the other hand, has rules which resemble ordinary calculus and has intrinsic geometric properties which render it more natural when dealing with geometric problems such as random motion on manifolds.

An alternative view on SDEs is the stochastic flow of diffeomorphisms. This understanding is unambiguous and corresponds to the Stratonovich version of the continuous time limit of stochastic difference equations. Associated with SDEs is the Smoluchowski equation or the Fokker–Planck equation, an equation describing the time evolution of probability distribution functions. The generalization of the Fokker–Planck evolution to temporal evolution of differential forms is provided by the concept of stochastic evolution operator.

In physical science, there is an ambiguity in the usage of the term "Langevin SDEs". While Langevin SDEs can be of a more general form, this term typically refers to a narrow class of SDEs with gradient flow vector fields. This class of SDEs is particularly popular because it is a starting point of the Parisi–Sourlas stochastic quantization procedure, leading to a N=2 supersymmetric model closely related to supersymmetric quantum mechanics. From the physical point of view, however, this class of SDEs is not very interesting because it never exhibits spontaneous breakdown of topological supersymmetry, i.e., (overdamped) Langevin SDEs are never chaotic.

Stochastic calculus

Brownian motion or the Wiener process was discovered to be exceptionally complex mathematically. The Wiener process is almost surely nowhere differentiable; thus, it requires its own rules of calculus. There are two dominating versions of stochastic calculus, the Itô stochastic calculus and the Stratonovich stochastic calculus. Each of the two has advantages and disadvantages, and newcomers are often confused whether the one is more appropriate than the other in a given situation. Guidelines exist (e.g. Øksendal, 2003) and conveniently, one can readily convert an Itô SDE to an equivalent Stratonovich SDE and back again. Still, one must be careful which calculus to use when the SDE is initially written down.

Numerical solutions

Numerical methods for solving stochastic differential equations include the Euler–Maruyama method, Milstein method and Runge–Kutta method (SDE).

Use in physics

In physics, SDEs have widest applicability ranging from molecular dynamics to neurodynamics and to the dynamics of astrophysical objects. More specifically, SDEs describe all dynamical systems, in which quantum effects are either unimportant or can be taken into account as perturbations. SDEs can be viewed as a generalization of the dynamical systems theory to models with noise. This is an important generalization because real systems cannot be completely isolated from their environments and for this reason always experience external stochastic influence.

There are standard techniques for transforming higher-order equations into several coupled first-order equations by introducing new unknowns. Therefore, the following is the most general class of SDEs:

:$\frac = F(x(t)) + \sum_^ng_\alpha(x(t))\xi^\alpha(t),\,$

where $x\in X$ is the position in the system in its phase (or state) space, $X$, assumed to be a differentiable manifold, the $F\in TX$ is a flow vector field representing deterministic law of evolution, and $g_\alpha\in TX$ is a set of vector fields that define the coupling of the system to Gaussian white noise, $\xi^\alpha$. If $X$ is a linear space and $g$ are constants, the system is said to be subject to additive noise, otherwise it is said to be subject to multiplicative noise. This term is somewhat misleading as it has come to mean the general case even though it appears to imply the limited case in which $g(x) \propto x$.

For a fixed configuration of noise, SDE has a unique solution differentiable with respect to the initial condition. Nontriviality of stochastic case shows up when one tries to average various objects of interest over noise configurations. In this sense, an SDE is not a uniquely defined entity when noise is multiplicative and when the SDE is understood as a continuous time limit of a stochastic difference equation. In this case, SDE must be complemented by what is known as "interpretations of SDE" such as Itô or a Stratonovich interpretations of SDEs. Nevertheless, when SDE is viewed as a continuous-time stochastic flow of diffeomorphisms, it is a uniquely defined mathematical object that corresponds to Stratonovich approach to a continuous time limit of a stochastic difference equation.

In physics, the main method of solution is to find the probability distribution function as a function of time using the equivalent Fokker–Planck equation (FPE). The Fokker–Planck equation is a deterministic partial differential equation. It tells how the probability distribution function evolves in time similarly to how the Schrödinger equation gives the time evolution of the quantum wave function or the diffusion equation