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jmholzer / probabilistic

Generate probability curves for the future price of publicly traded securities using options chain data.
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Add enforcement of PDF conditions to the calculations in `core` #31

Open jmholzer opened 1 year ago

jmholzer commented 1 year ago

The logic in core must be changed such that the generated PDFs meet the minimum conditions for such a distribution:

  1. The derived CDF must have a value of 1 at the 'right boundary' of the domain.
  2. The PDF must have a value at the 'left boundary' of the domain (0 at a price of 0 as a negative price is not possible).
jmholzer commented 1 year ago

We deprioritised this in a meeting (29/11/22) because:

  1. Any manipulation of the generated PDF results in information loss.
  2. There is no way to enforce continuity between the 'true' PDF and the 'false' tail distributions we would add.
  3. It is unclear if this feature is important to end-users.