Welcome to Vinegar
Mission Statement
VH-Labs is a resource we plan to develop over time to promote financial literacy and digitization. VH-Labs will publish Python, C++, C#, Cython, Javascript, VBA, Matlab and R code that will have a blend of pedagogic and practitioner themes. This is intended to follow the approach introduced by Fabrice Rouah and Diethelm Weurtz who developed online repositories with extremely useful code for pricing and valuation.
Unfortunately, Fabrice's Volopta website has now become defunct but his books are still very popular and highly practical. The thumbnails, map out a textbook type organization of Finance themes ranging from Fixed Income to Option valuation. In addition, to teasing out: American vs European and Exotics, we also apply some operations research techniques to the field of option pricing. In particular, we substantially augment the speed of computation for lattice models to the point that they surpass both in speed and accuracy conventional closed-form solutions for pricing American options. Numerically intensive models devour processing power and we remedy this for one class of option pricing model with Intelligent Lattice Search . This approach can be generalized to any lattice.
Machine Learning is introduced for Option Pricing. Machine Learning is also presented in the Fixed Income area for Mortgage Origination with Ctrees, Logistic Regression and Random Forest techniques being set up in RStudioCloud using R code provided by Hal Varian. sklearn libraries are developed in Google Colabs to extend this analysis within a training and testing framework. We introduce powerful Visualization and Data Transformation by making use of the Tidyverse R suite of packages. We will also illustrate how to introduce R code into Google Colab for Option valuation.
In this portal, we also more generally present/review pricing models based on: Black Scholes, Binomial, Trinomial and Monte Carlo. We present code in a style not unlike what is on offer in Github and in addition afford some extra explanation akin to Wikipedia. Linked to each snippet of code we will try to provide some video footage explaining how models work, how to implement same in varying platforms and refinements that can be introduced. This may have some value to fintech developers, risk managers, compliance officers, regulators, accountants and to sectoral stakeholders in energy/insurance where embedded options have to be accounted for/understood/hedged. Dodd Frank and Solvency II codify heavy responsibility for transparency and timely valuation. Workable code permits models to come to life and repositories like this will help render accessible some of the more taxing estimation techniques that are now considered standard. We also try to provide some health warnings and point to instances where derivatives would appear to be highly dysfunctional. This it must be recognized is part of the landscape we should not be slow in pointing out.
We hope to present a fruitful but manageable learning curve to newbies and a handy quick reference check to many seasoned modelers. To those who are taking their first steps, we recommend starting with Futures Markets, by Robert Shiller. Also, his companion Lecture on Options Markets is intuitive and refreshingly insightful. We also strongly recommend the following texts (1) John Hull, (2) Robert MacDonald (3) Simon Benninga (4) Kerry Back and (5) Yves Hilpisch. Equally, the RMetrics series with R code and instructional materials provide a comprehensive set of tools for gaining a mastery of this field.
Founder: Qianru (Jennifer) Shang qianru.shang@tudublin.ie
Founder: Brian Byrne brian.byrne@tudublin.ie
// The code that is provided here is free software; you can redistribute it and/or
// modify it under the terms of the GNU General Public License
// as published by the Free Software Foundation.
// These snippets of code here are distributed in the hope that they will be useful,
// but WITHOUT ANY WARRANTY; without even the implied warranty of
// MERCHANTABILITY or FITNESS FOR A PARTICULAR PURPOSE. See the
// GNU General Public License for more details.
// http://www.fsf.org/copyleft/gpl.html
If you have a github link you would like to share or any other type financial literacy resources or code repository please let us know and we will feature it as a useful link on this portal.
