Quantitative Finance Library & Option Book Management Tool

Welcome to the Quantitative Finance Library, a Python-based toolkit for modeling, analyzing, and managing books of european options. This repository is the result of in-depth studies in quantitative finance, combining practical tools with advanced academic concepts.

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📊 Features and Highlights

• Comprehensive Risk Analysis: Includes PnL, Greeks, Vega convexity, skew, and term structure risk metrics.
• Option Portfolio Management: Analyzing and managing books of European options.
• Dynamic Simulations: Simulating the evolution of underlying assets and risk profiles.
• Volatility Surfaces: Modeling volatility as a surface for active volatility trading.
• Learning Tool: A valuable application for an initial assessment of risk exposure in a new, advanced trading strategy.

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🚀 Demo Code

1. Demo script :

• Visualizing Trading Strategies – This tool is perfect for users who want to visualize new trading strategies. Users can easily access the theoretical price of a book, payoff, Greek exposure (in 2D or 3D), skew, and term structure. https://youtu.be/npcQdp4R_DU?si=ZkZCIkVludQWTVGu

2. Booking script :

• Options Trading and Risk Management – For more advanced users, this tool allows traders to save their positions and conveniently access risk metrics, making it highly useful for managing option trades. https://youtu.be/Wg5Euv6VoKg

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📈 Risk Exposure Analysis

This library provides a detailed breakdown of portfolio risk. Below are sample visualizations of risk metrics:

Payoff

Delta Risk Exposure

Vega Convexity

Pnl Price Exposure

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🌀 Volatility Surface: Smile and Skew

Volatility Surface Example

Volatility surfaces integrate skew and term structure, required for OTM option trading.

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📚 Description of Classes

1. Asset Class

• Represents the underlying asset for options.
• Enables simulations and position management for hedging strategies.

2. Option Class

• Built on the Asset class to represent financial derivatives.
• Key methods:

- Risk Metrics: DeltaRisk, GammaRisk, VegaRisk, ThetaRisk, VannaRisk, VolgaRisk - Pricing: optionpricemc, optionpriceclose_formulae - Visualization: displaypayoffoption, RiskAnalysis, PnlRisk

3. Option 1st Generation

• Comprises European vanilla options (e.g., spreads, straddles, strangles).
• Inherits features from the Option class for advanced analysis.

4. Book Class

• Combines multiple options (European or 1st Generation) into a portfolio.
• Focused on a single underlying asset for simplicity.

5. Booking Request

• Updates a booking Excel file to manage option book positions.
• Computes Mark-to-Market (MtM) values and assesses risk exposure.

Example Visualization:

DashBoard - Risk exposure management & Booking (IN PROGRESS...)

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:zap: Subprojects

I have also led parallel studies on:

• Optimizations.
• DA Power Correlations between countries.
• Cross-Border Optimizations in power markets.
• Swing Options for energy markets.
• Pricing CSSOs.

This library integrates these research insights into actionable tools for advanced financial and energy market analysis.

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🎯 Motivations

This project began in Fall 2023 and has evolved with three main goals:

• Academic Exploration: Integrate advanced quantitative finance approaches.
• Personal Library: Develop a Python toolkit for advanced option strategies.
• Portfolio Management: Study and manage the evolution of option books over time.

The Quantitative Finance Library is now a robust tool for risk analysis and option portfolio management, leveraging simulations and dynamic risk profiling.

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🛠️ How to Use

• Clone the repository:

git clone https://github.com/Quantitative_Finance.git
Install dependencies:

bash pip install -r requirements.txt

• Explore the demo code and customize it for your use case.

📥 Contributions

Contributions, issues, and feature requests are welcome! Feel free to fork the repository and submit a pull request.

📧 Contact

For questions or feedback, contact: hugo.lambert.perso@gmail.com