Comparison of the performance of Merton and Heston models in predicting the price of gold coin futures contracts

Subject Areas : Financial engineering

Rahele  Baqeri ¹ (Department of Industrial Management, Research Science Unit, Islamic Azad University, Tehran, Iran)
mohammadreza  setayesh ² (Department of Accounting, Department of Research Sciences, Islamic Azad University, Tehran, Iran)

Received: 2021-10-02 Accepted : 2021-10-30 Published : 2022-06-22

Keywords: Stochastic differential equations, Predicting the Price of Future Gold Coin Contracts, Random Process – Heston Mode, Merton Model,

Abstract :

Today, investing in gold markets is an important part of any country's economy, so estimating the price of gold is one of the most important topics of study for economists and financial analysts who have developed different approaches and perspectives. Naturally, methods can be durable and suitable for use that have the least investment error and risk. In developing countries such as Iran, due to inflation and uncertainty about the future, the demand for gold to cover the risk of inflation is high.The formation of the Bahar Azadi coin futures contract market in the Commodity Exchange in recent years has also helped to create an organized market to cover risk and also to use arbitrage opportunities in the gold market. The trading statistics of Bahar Azadi coin futures contract have grown significantly since the entry of its first symbol in the trading table of Iran Commodity Exchange, so that it has created an organized market with high trading volume and appropriate liquidity in the field of derivatives trading in the country. In this study, we decided to use two models of stochastic differential equations (Heston and Merton) to predict the price of futures contracts and compare the results.