Approaches to forecasting volatility: models and their performances for emerging equity markets

In this study, the performance of a number of well-known statistical and stochastic models is analyzed when applied to forecasting returns and volatility in some financial markets. A new affine jump-diffusion model is also introduced and it is showed that this model achieves better results than existing ones when used to forecast volatility. The bases for developing the new model are some results showing that jumps introduced both in the return and volatility process play an important role in forecasting volatility, particularly in highly volatile markets, such as emerging equity markets.