Address 2nd review

Author: LouisSzeto

Algorithm/QCAlgorithm.Indicators.cs

@@ -858,10 +858,14 @@ public Identity Identity(Symbol symbol, TimeSpan resolution, Func<IBaseData, dec
         /// <param name="resolution">The desired resolution of the data</param>
         /// <returns>A new ImpliedVolatility indicator for the specified symbol</returns>
         [DocumentationAttribute(Indicators)]
-        public ImpliedVolatility IV(Symbol symbol, decimal riskFreeRate = 0.05m, int period = 252, OptionPricingModelType optionModel = OptionPricingModelType.BlackScholes, Resolution? resolution = null)
+        public ImpliedVolatility IV(Symbol symbol, decimal? riskFreeRate = null, int period = 252, OptionPricingModelType optionModel = OptionPricingModelType.BlackScholes, Resolution? resolution = null)
         {
             var name = CreateIndicatorName(symbol, $"IV({riskFreeRate},{period},{optionModel})", resolution);
-            var iv = new ImpliedVolatility(name, symbol, riskFreeRate, period, optionModel);
+            IRiskFreeInterestRateModel riskFreeRateModel = riskFreeRate.HasValue
+                ? new ConstantRiskFreeRateInterestRateModel(riskFreeRate.Value)
+                // Make it a function so it's lazily evaluated: SetRiskFreeInterestRateModel can be called after this method
+                : new FuncRiskFreeRateInterestRateModel((datetime) => RiskFreeInterestRateModel.GetInterestRate(datetime));
+            var iv = new ImpliedVolatility(name, symbol, riskFreeRateModel, period, optionModel);
             RegisterIndicator(symbol, iv, ResolveConsolidator(symbol, resolution));
             RegisterIndicator(symbol.Underlying, iv, ResolveConsolidator(symbol, resolution));
             return iv;

Indicators/ImpliedVolatility.cs

@@ -15,16 +15,18 @@
 
 using System;
 using MathNet.Numerics.RootFinding;
+using Python.Runtime;
+using QuantConnect.Data;
 using QuantConnect.Data.Consolidators;
-using QuantConnect.Data.Market;
 using QuantConnect.Logging;
+using QuantConnect.Python;
 
 namespace QuantConnect.Indicators
 {
     /// <summary>
     /// Implied Volatility indicator that calculate the IV of an option using Black-Scholes Model
     /// </summary>
-    public class ImpliedVolatility : BarIndicator, IIndicatorWarmUpPeriodProvider
+    public class ImpliedVolatility : IndicatorBase<IndicatorDataPoint>, IIndicatorWarmUpPeriodProvider
     {
         private readonly Symbol _optionSymbol;
         private readonly Symbol _underlyingSymbol;
@@ -34,29 +36,34 @@ public class ImpliedVolatility : BarIndicator, IIndicatorWarmUpPeriodProvider
         private OptionPricingModelType _optionModel;
 
         /// <summary>
-        /// Gets the expiration time of the option
+        /// Risk-free rate model
         /// </summary>
-        public DateTime Expiry { get; }
+        private readonly IRiskFreeInterestRateModel _riskFreeInterestRateModel;
 
         /// <summary>
-        /// Gets the option right (call/put) of the option
+        /// Gets the expiration time of the option
         /// </summary>
-        public OptionRight Right { get; }
+        public DateTime Expiry => _optionSymbol.ID.Date;
 
         /// <summary>
-        /// Risk Free Rate
+        /// Gets the option right (call/put) of the option
         /// </summary>
-        public decimal RiskFreeRate { get; set; }
+        public OptionRight Right => _optionSymbol.ID.OptionRight;
 
         /// <summary>
         /// Gets the strike price of the option
         /// </summary>
-        public decimal Strike { get; }
+        public decimal Strike => _optionSymbol.ID.StrikePrice;
 
         /// <summary>
         /// Gets the option style (European/American) of the option
         /// </summary>
-        public OptionStyle Style { get; }
+        public OptionStyle Style => _optionSymbol.ID.OptionStyle;
+
+        /// <summary>
+        /// Risk Free Rate
+        /// </summary>
+        public Identity RiskFreeRate { get; set; }
 
         /// <summary>
         /// Gets the historical volatility of the underlying
@@ -73,28 +80,15 @@ public class ImpliedVolatility : BarIndicator, IIndicatorWarmUpPeriodProvider
         /// </summary>
         public IndicatorBase<IndicatorDataPoint> UnderlyingPrice { get; }
 
-        /// <summary>
-        /// Initializes a new instance of the ImpliedVolatility class
-        /// </summary>
-        /// <param name="option">The option to be tracked</param>am>
-        /// <param name="riskFreeRate">The risk free rate</param>
-        /// <param name="period">The lookback period of historical volatility</param>
-        /// <param name="optionModel">The option pricing model used to estimate IV</param>
-        public ImpliedVolatility(Symbol option, decimal riskFreeRate = 0.05m, int period = 252,
-            OptionPricingModelType optionModel = OptionPricingModelType.BlackScholes)
-            : this($"IV({option.Value},{riskFreeRate},{period},{optionModel})", option, riskFreeRate, period, optionModel)
-        {
-        }
-
         /// <summary>
         /// Initializes a new instance of the ImpliedVolatility class
         /// </summary>
         /// <param name="name">The name of this indicator</param>
         /// <param name="option">The option to be tracked</param>
-        /// <param name="riskFreeRate">The risk free rate</param>
+        /// <param name="riskFreeRateModel">Risk-free rate model</param>
         /// <param name="period">The lookback period of historical volatility</param>
         /// <param name="optionModel">The option pricing model used to estimate IV</param>
-        public ImpliedVolatility(string name, Symbol option, decimal riskFreeRate = 0.05m, int period = 252, 
+        public ImpliedVolatility(string name, Symbol option, IRiskFreeInterestRateModel riskFreeRateModel, int period = 252, 
             OptionPricingModelType optionModel = OptionPricingModelType.BlackScholes)
             : base(name)
         {
@@ -107,14 +101,10 @@ public ImpliedVolatility(string name, Symbol option, decimal riskFreeRate = 0.05
             _optionSymbol = option;
             _underlyingSymbol = option.Underlying;
             _roc = new(1);
+            _riskFreeInterestRateModel = riskFreeRateModel;
             _optionModel = optionModel;
-
-            Strike = sid.StrikePrice;
-            Expiry = sid.Date;
-            Right = sid.OptionRight;
-            Style = sid.OptionStyle;
-            RiskFreeRate = riskFreeRate;
 
+            RiskFreeRate = new Identity(name + "_RiskFreeRate");
             HistoricalVolatility = IndicatorExtensions.Times(
                 IndicatorExtensions.Of(
                     new StandardDeviation(period),
@@ -133,6 +123,75 @@ public ImpliedVolatility(string name, Symbol option, decimal riskFreeRate = 0.05
             WarmUpPeriod = period;
         }
 
+        /// <summary>
+        /// Initializes a new instance of the ImpliedVolatility class
+        /// </summary>
+        /// <param name="option">The option to be tracked</param>
+        /// <param name="riskFreeRateModel">Risk-free rate model</param>
+        /// <param name="period">The lookback period of historical volatility</param>
+        /// <param name="optionModel">The option pricing model used to estimate IV</param>
+        public ImpliedVolatility(Symbol option, IRiskFreeInterestRateModel riskFreeRateModel, int period = 252,
+            OptionPricingModelType optionModel = OptionPricingModelType.BlackScholes)
+            : this($"IV({option.Value},{period},{optionModel})", option, riskFreeRateModel, period, optionModel)
+        {
+        }
+
+        /// <summary>
+        /// Initializes a new instance of the ImpliedVolatility class
+        /// </summary>
+        /// <param name="name">The name of this indicator</param>
+        /// <param name="option">The option to be tracked</param>
+        /// <param name="riskFreeRateModel">Risk-free rate model</param>
+        /// <param name="period">The lookback period of historical volatility</param>
+        /// <param name="optionModel">The option pricing model used to estimate IV</param>
+        public ImpliedVolatility(string name, Symbol option, PyObject riskFreeRateModel, int period = 252,
+            OptionPricingModelType optionModel = OptionPricingModelType.BlackScholes)
+            : this(name, option, RiskFreeInterestRateModelPythonWrapper.FromPyObject(riskFreeRateModel), period, optionModel)
+        {
+        }
+
+        /// <summary>
+        /// Initializes a new instance of the ImpliedVolatility class
+        /// </summary>
+        /// <param name="option">The option to be tracked</param>
+        /// <param name="riskFreeRateModel">Risk-free rate model</param>
+        /// <param name="period">The lookback period of historical volatility</param>
+        /// <param name="optionModel">The option pricing model used to estimate IV</param>
+        public ImpliedVolatility(Symbol option, PyObject riskFreeRateModel, int period = 252,
+            OptionPricingModelType optionModel = OptionPricingModelType.BlackScholes)
+            : this($"IV({option.Value},{period},{optionModel})", option, 
+                RiskFreeInterestRateModelPythonWrapper.FromPyObject(riskFreeRateModel), period, optionModel)
+        {
+        }
+
+        /// <summary>
+        /// Initializes a new instance of the ImpliedVolatility class
+        /// </summary>
+        /// <param name="name">The name of this indicator</param>
+        /// <param name="option">The option to be tracked</param>
+        /// <param name="riskFreeRate">Risk-free rate, as a constant</param>
+        /// <param name="period">The lookback period of historical volatility</param>
+        /// <param name="optionModel">The option pricing model used to estimate IV</param>
+        public ImpliedVolatility(string name, Symbol option, decimal riskFreeRate = 0.05m, int period = 252,
+            OptionPricingModelType optionModel = OptionPricingModelType.BlackScholes)
+            : this(name, option, new ConstantRiskFreeRateInterestRateModel(riskFreeRate), period, optionModel)
+        {
+        }
+
+        /// <summary>
+        /// Initializes a new instance of the ImpliedVolatility class
+        /// </summary>
+        /// <param name="option">The option to be tracked</param>
+        /// <param name="riskFreeRate">Risk-free rate, as a constant</param>
+        /// <param name="period">The lookback period of historical volatility</param>
+        /// <param name="optionModel">The option pricing model used to estimate IV</param>
+        public ImpliedVolatility(Symbol option, decimal riskFreeRate = 0.05m, int period = 252,
+            OptionPricingModelType optionModel = OptionPricingModelType.BlackScholes)
+            : this($"IV({option.Value},{period},{riskFreeRate},{optionModel})", option, 
+                new ConstantRiskFreeRateInterestRateModel(riskFreeRate), period, optionModel)
+        {
+        }
+
         /// <summary>
         /// Gets a flag indicating when this indicator is ready and fully initialized
         /// </summary>
@@ -148,17 +207,19 @@ public ImpliedVolatility(string name, Symbol option, decimal riskFreeRate = 0.05
         /// </summary>
         /// <param name="input">The input given to the indicator</param>
         /// <returns>The input is returned unmodified.</returns>
-        protected override decimal ComputeNextValue(IBaseDataBar input)
+        protected override decimal ComputeNextValue(IndicatorDataPoint input)
         {
+            RiskFreeRate.Update(input.EndTime, _riskFreeInterestRateModel.GetInterestRate(input.EndTime));
+
             var inputSymbol = input.Symbol;
             if (inputSymbol == _optionSymbol)
             {
-                Price.Update(input.EndTime, input.Close);
+                Price.Update(input.EndTime, input.Price);
             }
             else if (inputSymbol == _underlyingSymbol)
             {
                 _consolidator.Update(input);
-                UnderlyingPrice.Update(input.EndTime, input.Close);
+                UnderlyingPrice.Update(input.EndTime, input.Price);
             }
             else
             {
@@ -194,14 +255,15 @@ private decimal CalculateIV(DateTime time)
             var spotPrice = UnderlyingPrice.Current.Value;
             var timeToExpiration = Convert.ToDecimal((Expiry - time).TotalDays) / 365m;
 
-            Func<double, double> f = (vol) => (double)(TheoreticalPrice(Convert.ToDecimal(vol), spotPrice, Strike, timeToExpiration, RiskFreeRate, Right, _optionModel) - price);
+            Func<double, double> f = (vol) => 
+                (double)(TheoreticalPrice(Convert.ToDecimal(vol), spotPrice, Strike, timeToExpiration, RiskFreeRate.Current.Value, Right, _optionModel) - price);
             try
             {
                 return Convert.ToDecimal(Brent.FindRoot(f, 0.01d, 1.0d, 1e-5d, 20));
             }
             catch
             {
-                Log.Error("Fail to converge, returning 0.");
+                Log.Error("ImpliedVolatility.CalculateIV(): Fail to converge, returning 0.");
                 return 0m;
             }
         }
@@ -211,12 +273,14 @@ private decimal CalculateIV(DateTime time)
         /// </summary>
         public override void Reset()
         {
+            _consolidator.Dispose();
             _consolidator = new(TimeSpan.FromDays(1));
             _consolidator.DataConsolidated += (_, bar) => {
                 _roc.Update(bar.EndTime, bar.Price);
             };
 
             _roc.Reset();
+            RiskFreeRate.Reset();
             HistoricalVolatility.Reset();
             Price.Reset();
             UnderlyingPrice.Reset();

Indicators/OptionPricingModelType.cs

@@ -23,10 +23,12 @@ public enum OptionPricingModelType
         /// <summary>
         /// Vanilla Black Scholes Model
         /// </summary>
+        /// <remarks>Preferred on calculating greeks for European options, and IV for all options</remarks>
         BlackScholes,
         /// <summary>
         /// The Cox-Ross-Rubinstein binomial tree model (CRR model)
         /// </summary>
+        /// <remarks>Preferred on calculating greeks for American options</remarks>
         BinomialCoxRossRubinstein
     }
 }

Tests/Algorithm/AlgorithmIndicatorsTests.cs

@@ -14,10 +14,6 @@
 */
 
 using System;
-using System.Collections.Generic;
-using System.Diagnostics;
-using System.Linq;
-using System.Linq.Expressions;
 
 using Moq;
 using NUnit.Framework;
@@ -26,7 +22,6 @@
 using QuantConnect.Data;
 using QuantConnect.Data.Market;
 using QuantConnect.Indicators;
-using QuantConnect.Interfaces;
 using QuantConnect.Lean.Engine.DataFeeds;
 using QuantConnect.Lean.Engine.HistoricalData;
 using QuantConnect.Tests.Engine.DataFeeds;
@@ -37,6 +32,7 @@ namespace QuantConnect.Tests.Algorithm
     public class AlgorithmIndicatorsTests
     {
         private QCAlgorithm _algorithm;
+        private Symbol _option;
 
         [SetUp]
         public void Setup()
@@ -52,6 +48,7 @@ public void Setup()
 
             _algorithm.SetDateTime(new DateTime(2013, 10, 11, 15, 0, 0));
             _algorithm.AddEquity("SPY");
+            _option = _algorithm.AddOption("SPY").Symbol;
             _algorithm.EnableAutomaticIndicatorWarmUp = true;
         }
 
@@ -93,5 +90,34 @@ public void SharpeRatioIndicatorUsesAlgorithmsRiskFreeRateModelSetAfterIndicator
             // Our interest rate provider should have been called once
             interestRateProviderMock.Verify(x => x.GetInterestRate(reference), Times.Once);
         }
+
+        [Test]
+        public void IVIndicatorUsesAlgorithmsRiskFreeRateModelSetAfterIndicatorRegistration()
+        {
+            // Register indicator
+            var sharpeRatio = _algorithm.IV(_option);
+
+            // Setup risk free rate model
+            var interestRateProviderMock = new Mock<IRiskFreeInterestRateModel>();
+            var reference = new DateTime(2023, 11, 21, 10, 0, 0);
+            interestRateProviderMock.Setup(x => x.GetInterestRate(reference)).Verifiable();
+
+            // Update indicator
+            sharpeRatio.Update(new IndicatorDataPoint(_option, reference, 30m));
+            sharpeRatio.Update(new IndicatorDataPoint(Symbols.SPY, reference, 300m));
+
+            // Our interest rate provider shouldn't have been called yet since it's hasn't been set to the algorithm
+            interestRateProviderMock.Verify(x => x.GetInterestRate(reference), Times.Never);
+
+            // Set the interest rate provider to the algorithm
+            _algorithm.SetRiskFreeInterestRateModel(interestRateProviderMock.Object);
+
+            // Update indicator
+            sharpeRatio.Update(new IndicatorDataPoint(_option, reference, 30m));
+            sharpeRatio.Update(new IndicatorDataPoint(Symbols.SPY, reference, 300m));
+
+            // Our interest rate provider should have been called once by each update
+            interestRateProviderMock.Verify(x => x.GetInterestRate(reference), Times.Exactly(2));
+        }
     }
 }