Volatility of Futures Contract in Iran Mercantile Market

Abstract

Most financial theories are relying on estimation of volatility. Volatility is not directly observable and must be estimated. In this research we investigate the volatility of gold, trading as a futures contract on the Iran Mercantile Exchange (IME) using intraday (high frequency) data from 5 January 2009 to May 2012. This paper uses several models for the calculation of volatility based on range prices. The results show that a simple measure of volatility (defined as the first logarithmic difference between the high and low prices) overestimates the other three measures. Comparing values of RMSE, MSE, MAD and MAPE we find out that Garman-Klass and Rogers-Satchell Models are more accurate estimator of volatility.

Keywords: volatility, range-based models, futures contracts