Forecasting using call returns

Interest rates are one of the most important aspects of any economic system. Forecasting interest rates is of great concern to investors and policy makers because it affects investment and saving behaviour of consumers, financial institution and policy makers.. The purpose of this article is to develop an appropriate model for forecasting call returns. The call returns are forecasted using Random walk, ARMA, ARMA-GARCH and ARMA-TGARCH. The results show that call returns have volatility clustering and GARCH based models are more appropriate to forecast than the other models. It is found that for call returns, ARMA-TGARCH model is the most appropriate model for forecasting.