PYTHON FOR DERIVATIVE ANALYTICS

Alicia Guerra

WHAT IS A DERIVATIVE?• In finance, a derivative is a contract that derives its value

from the performance of an underlying entity (i.e. an option, future, etc.)

DX ANALYTICS• Python library which allows for the modeling of rather

complex derivatives instruments and portfolios.

SIMULATION

Simulation classes in DX where relevant risk factors are modeled:• geometric_brownian_motion• jump_diffusion• square_root_diffusion

GEOMETRIC BROWNIAN MOTION• Used to model option prices in

the Black-Scholes model

JUMP DIFFUSION• Model for price behavior that

incorporates small, day-to-day “diffusive” movements together with larger, randomly occurring jumps.• Inclusion of jumps allows for

more realistic “crash” scenarios.

SQUARE ROOT DIFFUSION

• Models mean-reverting quantities like interest rates and volatility.

• Mean-reverting means it is assumed that a price will move to the average price over time.

CALIBRATION

HEDGING• Dynamic delta hedging is

a derivative trading strategy that attempts to reduce – or eliminate – the risk caused by price changes in the underlying asset.• A derivative’s delta is the

relation between the changes in the derivative’s price and the changes in the price of the underlying asset.

CONTACT ME

Email: alicia.developer@aliciaguerra.comLinkedIn: linkedin.com/in/aliciaisabelguerraTwitter: @skepchick92Phone: (619) 519-3805