A stochastic process is a system that evolves over time with inherent randomness — where the next state depends on the current state plus a random component. Stock prices,...
The core idea
A stochastic process is a system that evolves over time with inherent randomness — where the next state depends on the current state plus a random component. Stock prices,...
Connected
Mental Model
Mental ModelBayes Theorem
your beliefs proportionally to how surprising the new evidence is — the foundati
Mental Model
Mental ModelBlack Swan Theory
, unpredictable events with extreme impact shape history.
Mental Model
Mental ModelCompounding
growth from consistent small gains over long time horizons.
Mental Model
Mental ModelCorrelation vs Causation
together does not mean one causes the other.
Mental Model
Mental ModelErgodicity
works across many simultaneously may not work for one across time.
Mental Model
Mental ModelExponential Growth
accelerates proportionally to current size, slow then explosive.