Estimation the risk-neutral processes in jump–diffusion models of gold coin future contracts in Iran Mercantile Exchange[enter Paper Title]

Malekiniya, N., asgari alouj, H. (2021). Estimation the risk-neutral processes in jump–diffusion models of gold coin future contracts in Iran Mercantile Exchange. Journal of Investment Knowledge, 10(38), 571-590.

20 Pages Posted: 18 May 2021

See all articles by Nahid Maleki Nia

Nahid Maleki Nia

Islamic Azad University (IAU) - Bilesavar branch

Hosein Asgari Alouj

Islamic Azad University (IAU) - Bilesavar branch

Date Written: May 17, 2021

Abstract

Estimation the risk market prices and the functions of the stochastic processes of the model are necessary in commodity derivatives pricing. When a closed-form solution is unclear, estimating of the risk market price is a main question in the jump–diffusion models. This paper along with Gomez's, Habibilashgari's and Rodriguez's review (2016) is suggested to estimate the functions of the risk-neutral processes directly from market data of Iran. In this approach, there is no need to estimate the physical drift and the risk market prices of coin future contracts pricing. This research estimates the risk-neutral drifts, volatilities and parameters of the jump range distributions with Iran Mercantile Exchange data of the coin future contract , from 2010 to 2017. The findings show that JDM and DM under price the futures prices and the prices obtained with the JDM are closer to the observed prices than those obtained with the DM. For the longest maturities the JDM provides smaller errors than the DM. The higher the maturity, the higher the differences between the two models.

Keywords: Gold coin future contracts Jump–diffusion stochastic processes Risk-neutral measure Numerical differentiation Nadaraya–Watson nonparametric estimation

Suggested Citation

Nia, Nahid Maleki and Asgari Alouj, Hosein, Estimation the risk-neutral processes in jump–diffusion models of gold coin future contracts in Iran Mercantile Exchange[enter Paper Title] (May 17, 2021). Malekiniya, N., asgari alouj, H. (2021). Estimation the risk-neutral processes in jump–diffusion models of gold coin future contracts in Iran Mercantile Exchange. Journal of Investment Knowledge, 10(38), 571-590., Available at SSRN: https://ssrn.com/abstract=3848307

Nahid Maleki Nia

Islamic Azad University (IAU) - Bilesavar branch

Iran

Hosein Asgari Alouj (Contact Author)

Islamic Azad University (IAU) - Bilesavar branch

Iran

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