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OptionIndicatorsMirrorContractsRegressionAlgorithm.cs
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OptionIndicatorsMirrorContractsRegressionAlgorithm.cs
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/*
* QUANTCONNECT.COM - Democratizing Finance, Empowering Individuals.
* Lean Algorithmic Trading Engine v2.0. Copyright 2014 QuantConnect Corporation.
*
* Licensed under the Apache License, Version 2.0 (the "License");
* you may not use this file except in compliance with the License.
* You may obtain a copy of the License at http://www.apache.org/licenses/LICENSE-2.0
*
* Unless required by applicable law or agreed to in writing, software
* distributed under the License is distributed on an "AS IS" BASIS,
* WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
* See the License for the specific language governing permissions and
* limitations under the License.
*/
using System;
using System.Collections.Generic;
using MathNet.Numerics.RootFinding;
using QuantConnect.Data;
using QuantConnect.Data.Consolidators;
using QuantConnect.Indicators;
using QuantConnect.Interfaces;
using QuantConnect.Logging;
namespace QuantConnect.Algorithm.CSharp
{
/// <summary>
/// Algorithm illustrating the usage of the <see cref="OptionIndicatorBase"/> indicators with mirror-paired contracts
/// </summary>
public class OptionIndicatorsMirrorContractsRegressionAlgorithm : QCAlgorithm, IRegressionAlgorithmDefinition
{
private ImpliedVolatility _impliedVolatility;
private Delta _delta;
private Gamma _gamma;
private Vega _vega;
private Theta _theta;
private Rho _rho;
public override void Initialize()
{
SetStartDate(2014, 6, 5);
SetEndDate(2014, 6, 7);
SetCash(100000);
var equity = AddEquity("AAPL", Resolution.Daily).Symbol;
var option = QuantConnect.Symbol.CreateOption("AAPL", Market.USA, OptionStyle.American, OptionRight.Put, 650m, new DateTime(2014, 6, 21));
AddOptionContract(option, Resolution.Daily);
// add the call counter side of the mirrored pair
var mirrorOption = QuantConnect.Symbol.CreateOption("AAPL", Market.USA, OptionStyle.American, OptionRight.Call, 650m, new DateTime(2014, 6, 21));
AddOptionContract(mirrorOption, Resolution.Daily);
_delta = D(option, mirrorOption, optionModel: OptionPricingModelType.BinomialCoxRossRubinstein, ivModel: OptionPricingModelType.BlackScholes);
_gamma = G(option, mirrorOption, optionModel: OptionPricingModelType.ForwardTree, ivModel: OptionPricingModelType.BlackScholes);
_vega = V(option, mirrorOption, optionModel: OptionPricingModelType.ForwardTree, ivModel: OptionPricingModelType.BlackScholes);
_theta = T(option, mirrorOption, optionModel: OptionPricingModelType.ForwardTree, ivModel: OptionPricingModelType.BlackScholes);
_rho = R(option, mirrorOption, optionModel: OptionPricingModelType.ForwardTree, ivModel: OptionPricingModelType.BlackScholes);
// A custom IV indicator with custom calculation of IV
var riskFreeRateModel = new InterestRateProvider();
var dividendYieldModel = new DividendYieldProvider(equity);
_impliedVolatility = new CustomImpliedVolatility(option, mirrorOption, riskFreeRateModel, dividendYieldModel);
RegisterIndicator(option, _impliedVolatility, new QuoteBarConsolidator(TimeSpan.FromDays(1)));
RegisterIndicator(mirrorOption, _impliedVolatility, new QuoteBarConsolidator(TimeSpan.FromDays(1)));
RegisterIndicator(equity, _impliedVolatility, new TradeBarConsolidator(TimeSpan.FromDays(1)));
// custom IV smoothing function: assume the lower IV is more "fair"
Func<decimal, decimal, decimal> smoothingFunc = (iv, mirrorIv) => Math.Min(iv, mirrorIv);
// set the smoothing function
_delta.ImpliedVolatility.SetSmoothingFunction(smoothingFunc);
_gamma.ImpliedVolatility.SetSmoothingFunction(smoothingFunc);
_vega.ImpliedVolatility.SetSmoothingFunction(smoothingFunc);
_theta.ImpliedVolatility.SetSmoothingFunction(smoothingFunc);
_rho.ImpliedVolatility.SetSmoothingFunction(smoothingFunc);
}
public override void OnEndOfAlgorithm()
{
if (_impliedVolatility == 0m || _delta == 0m || _gamma == 0m || _vega == 0m || _theta == 0m || _rho == 0m)
{
throw new Exception("Expected IV/greeks calculated");
}
Debug(@$"Implied Volatility: {_impliedVolatility},
Delta: {_delta},
Gamma: {_gamma},
Vega: {_vega},
Theta: {_theta},
Rho: {_rho}");
}
/// <summary>
/// This is used by the regression test system to indicate if the open source Lean repository has the required data to run this algorithm.
/// </summary>
public bool CanRunLocally { get; } = true;
/// <summary>
/// This is used by the regression test system to indicate which languages this algorithm is written in.
/// </summary>
public Language[] Languages { get; } = { Language.CSharp, Language.Python };
/// <summary>
/// Data Points count of all timeslices of algorithm
/// </summary>
public long DataPoints => 35;
/// <summary>
/// Data Points count of the algorithm history
/// </summary>
public int AlgorithmHistoryDataPoints => 0;
/// <summary>
/// This is used by the regression test system to indicate what the expected statistics are from running the algorithm
/// </summary>
public Dictionary<string, string> ExpectedStatistics => new Dictionary<string, string>
{
{"Total Orders", "0"},
{"Average Win", "0%"},
{"Average Loss", "0%"},
{"Compounding Annual Return", "0%"},
{"Drawdown", "0%"},
{"Expectancy", "0"},
{"Start Equity", "100000"},
{"End Equity", "100000"},
{"Net Profit", "0%"},
{"Sharpe Ratio", "0"},
{"Sortino Ratio", "0"},
{"Probabilistic Sharpe Ratio", "0%"},
{"Loss Rate", "0%"},
{"Win Rate", "0%"},
{"Profit-Loss Ratio", "0"},
{"Alpha", "0"},
{"Beta", "0"},
{"Annual Standard Deviation", "0"},
{"Annual Variance", "0"},
{"Information Ratio", "0"},
{"Tracking Error", "0"},
{"Treynor Ratio", "0"},
{"Total Fees", "$0.00"},
{"Estimated Strategy Capacity", "$0"},
{"Lowest Capacity Asset", ""},
{"Portfolio Turnover", "0%"},
{"OrderListHash", "d41d8cd98f00b204e9800998ecf8427e"}
};
}
public class CustomImpliedVolatility : ImpliedVolatility
{
public CustomImpliedVolatility(Symbol option, Symbol mirrorOption, IRiskFreeInterestRateModel riskFreeRateModel, IDividendYieldModel dividendYieldModel)
: base(option, riskFreeRateModel, dividendYieldModel, mirrorOption, period: 2)
{
SetSmoothingFunction((iv, mirrorIV) => iv);
}
protected override decimal CalculateIV(decimal timeTillExpiry)
{
// we demonstate put-call parity calculation here, but note that it is not suitable for American options
try
{
Func<double, double> f = (vol) =>
{
var callBlackPrice = OptionGreekIndicatorsHelper.BlackTheoreticalPrice(
Convert.ToDecimal(vol), UnderlyingPrice, Strike, timeTillExpiry, RiskFreeRate, DividendYield, OptionRight.Call);
var putBlackPrice = OptionGreekIndicatorsHelper.BlackTheoreticalPrice(
Convert.ToDecimal(vol), UnderlyingPrice, Strike, timeTillExpiry, RiskFreeRate, DividendYield, OptionRight.Put);
return (double)(Price + OppositePrice - callBlackPrice - putBlackPrice);
};
return Convert.ToDecimal(Brent.FindRoot(f, 1e-7d, 2.0d, 1e-4d, 100));
}
catch
{
Log.Error("ImpliedVolatility.CalculateIV(): Fail to converge, returning 0.");
return 0m;
}
}
}
}