Welcome to spd_trading’s documentation!¶
This package estimates the Risk Neutral Density (RND) and Historical Density (HD) of an underlying and suggests a trading strategy based on the Pricing Kernel \(K=\frac{RND}{HD}\).
The RND is estimated by Rookley’s Method, which uses the option table of one trading day. risk_neutral_density.Calculator.get_rnd
The HD is estimated by a GARCH(1,1) Model, which uses a timeseries of the underlying. historical_density.Calculator.get_hd
The package is part of a Master Thesis, which will be published after grading 1. The thesis explains the theoretical background in more detail and gives more references. Furthermore an actual trading strategy was implemented and backtested on real data (BTC options March-September 2019).
The concious desicion of not implementing the actual strategy in the package is due to the high responsibility that would come with publishing such a risky tool. However, the construction of strategies based on the kernels are explained and analyized in the thesis as well.
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Link to Thesis as soon as it is available.