Implement indicator-based option price model

Algorithm.CSharp/IndicatorBasedOptionPricingModelIndexOptionRegressionAlgorithm.cs

@@ -0,0 +1,46 @@
+/*
+ * 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 QuantConnect.Indicators;
+using QuantConnect.Securities.Option;
+using System;
+
+namespace QuantConnect.Algorithm.CSharp
+{
+    /// <summary>
+    /// This example demonstrates how to override the option pricing model with the
+    /// <see cref="IndicatorBasedOptionPriceModel"/> for a given index option security.
+    /// </summary>
+    public class IndicatorBasedOptionPricingModelIndexOptionRegressionAlgorithm : IndicatorBasedOptionPricingModelRegressionAlgorithm
+    {
+        protected override DateTime TestStartDate => new(2021, 1, 4);
+
+        protected override DateTime TestEndDate => new(2021, 1, 4);
+
+        protected override Option GetOption()
+        {
+            var index = AddIndex("SPX");
+            var indexOption = AddIndexOption(index.Symbol);
+            indexOption.SetFilter(u => u.CallsOnly());
+            return indexOption;
+        }
+
+        /// <summary>
+        /// Data Points count of all timeslices of algorithm
+        /// </summary>
+        public override long DataPoints => 4806;
+    }
+}

Algorithm.CSharp/IndicatorBasedOptionPricingModelRegressionAlgorithm.cs

@@ -0,0 +1,177 @@
+/*
+ * 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.Collections.Generic;
+using QuantConnect.Data;
+using QuantConnect.Interfaces;
+using QuantConnect.Indicators;
+using QuantConnect.Securities.Option;
+using System;
+
+namespace QuantConnect.Algorithm.CSharp
+{
+    /// <summary>
+    /// This example demonstrates how to override the option pricing model with the
+    /// <see cref="IndicatorBasedOptionPriceModel"/> for a given option security.
+    /// </summary>
+    public class IndicatorBasedOptionPricingModelRegressionAlgorithm : QCAlgorithm, IRegressionAlgorithmDefinition
+    {
+        private bool _checked;
+
+        private Option _option;
+
+        protected virtual DateTime TestStartDate => new(2015, 12, 24);
+
+        protected virtual DateTime TestEndDate => new(2015, 12, 24);
+
+        public override void Initialize()
+        {
+            SetStartDate(TestStartDate);
+            SetEndDate(TestEndDate);
+            SetCash(100000);
+
+            _option = GetOption();
+            _option.PriceModel = new IndicatorBasedOptionPriceModel();
+        }
+
+        protected virtual Option GetOption()
+        {
+            var equity = AddEquity("GOOG");
+            var option = AddOption(equity.Symbol);
+            option.SetFilter(u => u.Strikes(-2, +2).Expiration(0, 180));
+            return option;
+        }
+
+        public override void OnData(Slice slice)
+        {
+            if (!_checked  && slice.OptionChains.TryGetValue(_option.Symbol, out var chain))
+            {
+                if (_option.PriceModel is not IndicatorBasedOptionPriceModel)
+                {
+                    throw new RegressionTestException("Option pricing model was not set to IndicatorBasedOptionPriceModel");
+                }
+
+                foreach (var contract in chain)
+                {
+                    var theoreticalPrice = contract.TheoreticalPrice;
+                    var iv = contract.ImpliedVolatility;
+                    var greeks = contract.Greeks;
+
+                    Log($"{contract.Symbol}:: Theoretical Price: {theoreticalPrice}, IV: {iv}, " +
+                           $"Delta: {greeks.Delta}, Gamma: {greeks.Gamma}, Vega: {greeks.Vega}, " +
+                           $"Theta: {greeks.Theta}, Rho: {greeks.Rho}, Lambda: {greeks.Lambda}");
+
+                    // Sanity check values
+                    if (theoreticalPrice <= 0)
+                    {
+                        throw new RegressionTestException($"Invalid theoretical price for {contract.Symbol}: {theoreticalPrice}");
+                    }
+                    // We check for all greeks and IV together. e.g. IV could be zero if the model can't converge, say for instance if a contract is iliquid or deep ITM/OTM
+                    if (greeks == null ||
+                        (iv == 0 && greeks.Delta == 0 && greeks.Gamma == 0 && greeks.Vega== 0 && greeks.Theta == 0 && greeks.Rho == 0))
+                    {
+                        throw new RegressionTestException($"Invalid Greeks for {contract.Symbol}");
+                    }
+
+                    // Manually evaluate the price model, just in case
+                    var result = _option.EvaluatePriceModel(slice, contract);
+
+                    if (result == null ||
+                        result.TheoreticalPrice != theoreticalPrice ||
+                        result.ImpliedVolatility != iv ||
+                        result.Greeks.Delta != greeks.Delta ||
+                        result.Greeks.Gamma != greeks.Gamma ||
+                        result.Greeks.Vega != greeks.Vega ||
+                        result.Greeks.Theta != greeks.Theta ||
+                        result.Greeks.Rho != greeks.Rho)
+                    {
+                        throw new RegressionTestException($"EvaluatePriceModel returned different results for {contract.Symbol}");
+                    }
+
+                    _checked |= true;
+                }
+            }
+        }
+
+        public override void OnEndOfAlgorithm()
+        {
+            if (!_checked)
+            {
+                throw new RegressionTestException("Option chain was never received.");
+            }
+        }
+
+        /// <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 List<Language> Languages { get; } = new() { Language.CSharp };
+
+        /// <summary>
+        /// Data Points count of all timeslices of algorithm
+        /// </summary>
+        public virtual long DataPoints => 37131;
+
+        /// <summary>
+        /// Data Points count of the algorithm history
+        /// </summary>
+        public int AlgorithmHistoryDataPoints => 0;
+
+        /// <summary>
+        /// Final status of the algorithm
+        /// </summary>
+        public AlgorithmStatus AlgorithmStatus => AlgorithmStatus.Completed;
+
+        /// <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%"},
+            {"Drawdown Recovery", "0"},
+            {"OrderListHash", "d41d8cd98f00b204e9800998ecf8427e"}
+        };
+    }
+}

Common/Securities/Option/OptionPriceModelResult.cs

@@ -28,6 +28,7 @@ public class OptionPriceModelResult
         /// </summary>
         public static OptionPriceModelResult None { get; } = new(0, NullGreeks.Instance);
 
+        private readonly Lazy<decimal> _theoreticalPrice;
         private readonly Lazy<Greeks> _greeks;
         private readonly Lazy<decimal> _impliedVolatility;
 
@@ -36,7 +37,10 @@ public class OptionPriceModelResult
         /// </summary>
         public decimal TheoreticalPrice
         {
-            get; private set;
+            get
+            {
+                return _theoreticalPrice.Value;
+            }
         }
 
         /// <summary>
@@ -67,10 +71,8 @@ public Greeks Greeks
         /// <param name="theoreticalPrice">The theoretical price computed by the price model</param>
         /// <param name="greeks">The sensitivities (greeks) computed by the price model</param>
         public OptionPriceModelResult(decimal theoreticalPrice, Greeks greeks)
+             : this(() => theoreticalPrice, () => decimal.Zero, () => greeks)
         {
-            TheoreticalPrice = theoreticalPrice;
-            _impliedVolatility = new Lazy<decimal>(() => 0m, isThreadSafe: false);
-            _greeks = new Lazy<Greeks>(() => greeks, isThreadSafe: false);
         }
 
         /// <summary>
@@ -80,8 +82,19 @@ public OptionPriceModelResult(decimal theoreticalPrice, Greeks greeks)
         /// <param name="impliedVolatility">The calculated implied volatility</param>
         /// <param name="greeks">The sensitivities (greeks) computed by the price model</param>
         public OptionPriceModelResult(decimal theoreticalPrice, Func<decimal> impliedVolatility, Func<Greeks> greeks)
+            : this(() => theoreticalPrice, impliedVolatility, greeks)
+        {
+        }
+
+        /// <summary>
+        /// Initializes a new instance of the <see cref="OptionPriceModelResult"/> class with lazy calculations of implied volatility and greeks
+        /// </summary>
+        /// <param name="theoreticalPrice">The theoretical price computed by the price model</param>
+        /// <param name="impliedVolatility">The calculated implied volatility</param>
+        /// <param name="greeks">The sensitivities (greeks) computed by the price model</param>
+        public OptionPriceModelResult(Func<decimal> theoreticalPrice, Func<decimal> impliedVolatility, Func<Greeks> greeks)
         {
-            TheoreticalPrice = theoreticalPrice;
+            _theoreticalPrice = new Lazy<decimal>(theoreticalPrice, isThreadSafe: false);
             _impliedVolatility = new Lazy<decimal>(impliedVolatility, isThreadSafe: false);
             _greeks = new Lazy<Greeks>(greeks, isThreadSafe: false);
         }