Estimation of the volatility of time series has taken off since the introduction of the GARCH and stochastic volatility models. While variants of the GARCH model are applied in scores of articles, use of the stochastic volatility model is less widespread. In this articleit is argued that one...

Present value calculations require predictions of cash flows both at near and distant future points in time. Such predictions are generally surrounded by considerable uncertainty and may critically depend on assumptions about parameter values as well as the form and stability of the data...