{"repo":"1leolem1/Implied-PDF-from-crypto-option-prices","free":true,"listed":false,"github":"https://github.com/1leolem1/Implied-PDF-from-crypto-option-prices","clone":"git clone https://github.com/1leolem1/Implied-PDF-from-crypto-option-prices.git","description":null,"language":"Python","stars":26,"topics":["cryptocurrency","market-making","options-trading"],"license":null,"category":"blockchain-web3","readme_excerpt":"This project aims to take a CSV extract of the option prices and output an implied Probability Density Function from the option prices. Here my input is a simple extract from Deribit. On the top right, you can see the CSV file. I want to generate this PDF using this CSV file. Methodology Morgan Stanley explains how assuming risk-neutral probabilities you can use butterfly options strategies to estimate the odds of the underlying expiring in this range. https://www.morganstanley.com/content/dam/msdotcom/en/assets/pdfs/Options Probabilities Exhibit Link.pdf Ignoring the premium payment, the average payoff in the butterfly range is: max payoff/2 If you look at football betting quotes, the likelihood of an event happening is: 1/payoff Let's look at a sample example: Man City are playing Luton at home (which they are this weekend), they have a payoff of 1.1 Their implied odds of winning are 1/1.1 91% (including the premium charged by the bookmaker) It's the same thing in this case. You pay a premium p betting the stock will expire in the butterfly range. The average payoff will be max payoff/2 = bfly width/2. The implied odds for this range are given by: premium / average payoff Using bids and asks marks in the CSV file, it is easy to price butterflies. However, this isn't accurate enough since there are insufficient data points. I will calibrate a SABR stochastic volatility model to the mid-price, recreating a volatility smile. However, this strategy might not be representative a","default_branch":null,"files":null,"tree":[],"storefront":"/r/1leolem1","claimed":false,"request_supported":{"post":"https://gitbuyer.com/r/1leolem1/Implied-PDF-from-crypto-option-prices/request-supported","requests":0},"note":"indexed from public GitHub; nothing is for sale on this page. Clone it from GitHub. Paid listings live at /search."}