Implied Volatility with C++ and Python Pt. 1

Let's take a well deserved break from thinking about data and get to some code.

Implied Volatility in Words

Volatility is a critical component to pricing options. Unfortunately it is a latent (or unobserved) quantity. Options traders therefore need a way to understand what the market says about volatility. Traders will look at the market price of an option and use a pricing model to figure out what volatility must be input into the model to match the price observed in the market. Whatever that volatility ends up being is called the implied volatility. In other words, the volatility implied by market prices.

Continue reading

Backtesting Data Considerations

Now that we have a high level overview of backtesting, I'll discuss backtesting data considerations. We'll likely encounter data quality issues along the way and will need to identify and clean the data before use in the system. Below I discuss some of the issues and how I will solve them. In later posts I'll discuss data sources and data storage technologies. Finally, a potential data pipeline that automates the acquisition, cleaning and storing will be explored.
Continue reading