A stochastic model is a model which takes uncertainties of input parameters into account. Therefore stochastic models replace uncertain parameters with random variables or stochastic processes.
Stochastic optimisations often formulate two-stage or multi-stage decision problems. The solution of the model consists of a sequence of decisions. During the first stage the decisions are made under uncertainty, i.e. without knowledge about how the possible realisations of the uncertain parameters will develop. In the second stage new information are added, i.e. in the second decision realisations of the uncertain parameters can be included. The number of stages and the number of scenarios looked at per stage are curcial for the calculating time of the model.