Lenny D. answered • 04/27/19
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Financial Professional with many years of Wall Street Experience
In its simplest. no cash flow in the future is known with certainty there is some element of randomness even in government bonds (remember 2011). The degree of randomness or dispersion is usually measure by Standard deviation or variance. Asset prices typically follow some process which has a drift and "noise" components. (mean and variance) knowledge of the drift and noise components can help value random cash flows (or streams of cash flows) with the aid of stochastic calculus.
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