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* Ser-Huang Poon started this project when she was at Lancaster University. She wants to thank the Unversity Research Committee for financial support. Rockinger, who is also at FAME and CEPR, acknowledges financial support from TMR (grant on Financial market's efficiency) and the Swiss National Science Foundation through NCCR (Financial Valuation and Risk Management). We would like to thank

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Financial market volatility is an important input for investment, option pricing, and financial market regulation. The emphasis of this review article is on forecasting instead of modelling; it compares the volatility forecasting findings in 93 papers published and written in the last two decades. Provided in this paper as well are volatility definitions, insights into problematic issues of forecast evaluation, data frequency, extreme values and the measurement of "actual" volatility. We compare volatility forecasting performance of two main approaches; historical volatility models and volatility implied from options. Forecasting results are compared across different asset classes and geographical regions.

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