Geometric Brownian motion by a different Brownian Motion—the model is called a stochastic volatility model. Geometric Brownian motion A geometric Brownian motion (GBM) (also known as exponential Brownian motion) is a continuous-time stochastic process in which the logarithm of the randomly varying quantity follows a Brownian motion (also called a Wiener process) with drift. It is an important example of stochastic processes satisfying a stochastic differential equation (SDE); in particular, it is used in mathematical finance to model stock prices in the Black–Scholes model. A stochastic process "S" is said to follow a GBM if it satisfies the following stochastic differential equation (SDE):
Brownian ratchet for example lifting a weight ("m") against gravity. The energy necessary to do this work apparently would come from the heat bath, without any heat gradient. Were such a machine to work successfully, its operation would violate the second law of thermodynamics, one form of which states: "It is impossible for any device that operates on a cycle to receive heat from a single reservoir and produce a net amount of work." Although at first sight the Brownian ratchet seems to extract useful work from Brownian motion, Feynman demonstrated that if the entire device is at the same temperature, the