Course Name: Systematic Options Trading, Section No: 12, Unit No: 6, Unit type: Notebook
function created "get_pop_empirical" in section 11 unit 7 takes 3 parameters but in this section the same funtion is called with 4 inputs?
Course Name: Systematic Options Trading, Section No: 12, Unit No: 6, Unit type: Notebook
function created "get_pop_empirical" in section 11 unit 7 takes 3 parameters but in this section the same funtion is called with 4 inputs?
Hello Bharat Sharma,
You are right. There is a difference between the parameters accepted in the two notebooks. Thanks for pointing it out and we will update the notebook in section 11 unit 7 with the function which can be found in the "options_util_quantra.py" file present in the downloadable zip file of the last section, ie section 30 unit 4.
The function takes 4 parameters and is as follows:
def get_pop_empirical(futures_data, current_price, days_to_expiry, price_range):
# Calculate empirical POP
trading_days_to_expiry = round(days_to_expiry * (5 / 7))
futures_data['percent_change_in_price'] = futures_data.futures_close.pct_change(trading_days_to_expiry)
forecasted_prices = (1 + futures_data['percent_change_in_price']) * current_price
histogram = np.histogram(forecasted_prices.dropna(), bins=30)
hist_dist = rv_histogram(histogram)
payoff = pd.DataFrame(index=price_range)
payoff['probability_empirical'] = hist_dist.cdf(x=price_range)
payoff['probability_empirical'] = payoff['probability_empirical'].diff()
return payoff