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 article it is argued that one reason for this difference is the relative difficulty of estimating the unobserved stochastic volatility, and the varying approaches that have been taken for such estimation. In order to simplify the… CONTINUE READING