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Figure 69 Source: Authors. Stochastic models: As noted, stochastic models give several outputs for one input in the model. These models are used to simulate complex physical processes that appeat to be directed by randomness. The simplest examples of stochastic models are time se- ries in which the variables given at a particular moment are according to their previous values and random error. In this case, the function that unites the values of the variable at different times are deterministic and the error is stochastic. The classical examples are the Markov chains, ARMA (Auto Regressive and Moving Average), etc. Figure A4.1 shows a descriptive picture of the different types of existing models for
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