Stochastic refers to a mathematical concept that involves randomness or chance. In simple terms, it describes systems or processes that involve random variations or probabilities. Stochastic models are often used to analyze and predict various uncertainties and random events that occur in real-world scenarios. In the context of finance, stochastic models are used to simulate and analyze the behavior of financial variables. Additionally, stochastic processes are also employed in fields like physics, engineering, and computer science to model complex systems affected by random fluctuations or noise.