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Add unit tests
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@LouisSzeto
LouisSzeto committed Jan 6, 2024
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359 changes: 359 additions & 0 deletions Tests/Indicators/ImpliedVolatilityTests.cs
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/*
* QUANTCONNECT.COM - Democratizing Finance, Empowering Individuals.
* Lean Algorithmic Trading Engine v2.0. Copyright 2014 QuantConnect Corporation.
*
* Licensed under the Apache License, Version 2.0 (the "License");
* you may not use this file except in compliance with the License.
* You may obtain a copy of the License at http://www.apache.org/licenses/LICENSE-2.0
*
* Unless required by applicable law or agreed to in writing, software
* distributed under the License is distributed on an "AS IS" BASIS,
* WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
* See the License for the specific language governing permissions and
* limitations under the License.
*/

using System;
using System.Globalization;
using System.IO;
using System.Linq;
using NUnit.Framework;
using QuantConnect.Data.Consolidators;
using QuantConnect.Data.Market;
using QuantConnect.Indicators;

namespace QuantConnect.Tests.Indicators
{
[TestFixture]
public class ImpliedVolatilityTests : CommonIndicatorTests<IBaseDataBar>
{
protected override string TestColumnName => "ImpliedVolatility";

private DateTime _reference = new DateTime(2022, 9, 1, 10, 0, 0);
private Symbol _symbol;
private Symbol _underlying;

protected override IndicatorBase<IBaseDataBar> CreateIndicator()
{
var indicator = new ImpliedVolatility("testImpliedVolatilityIndicator", _symbol, 0.04m);
return indicator;
}

[SetUp]
public void SetUp()
{
_symbol = Symbol.CreateOption("SPY", Market.USA, OptionStyle.American, OptionRight.Call, 450m, new DateTime(2023, 9, 1));
_underlying = _symbol.Underlying;
}

[TestCase("SPX230811C04300000")]
[TestCase("SPX230811C04500000")]
[TestCase("SPX230811C04700000")]
[TestCase("SPX230811P04300000")]
[TestCase("SPX230811P04500000")]
[TestCase("SPX230811P04700000")]
[TestCase("SPX230901C04300000")]
[TestCase("SPX230901C04500000")]
[TestCase("SPX230901C04700000")]
[TestCase("SPX230901P04300000")]
[TestCase("SPX230901P04500000")]
[TestCase("SPX230901P04700000")]
[TestCase("SPY230811C00430000")]
[TestCase("SPY230811C00450000")]
[TestCase("SPY230811C00470000")]
[TestCase("SPY230811P00430000")]
[TestCase("SPY230811P00450000")]
[TestCase("SPY230811P00470000")]
[TestCase("SPY230901C00430000")]
[TestCase("SPY230901C00450000")]
[TestCase("SPY230901C00470000")]
[TestCase("SPY230901P00430000")]
[TestCase("SPY230901P00450000")]
[TestCase("SPY230901P00470000")]
public void ComparesAgainstExternalData(string fileName)
{
var path = Path.Combine("TestData", "greeks", $"{fileName}.csv");
var symbol = ParseOptionSymbol(fileName);
var underlying = symbol.Underlying;

var indicator = new ImpliedVolatility(symbol, 0.04m);
RunTestIndicator(path, indicator, symbol, underlying);
}

[Test]
public override void ComparesAgainstExternalData()
{
// Not used
}

[TestCase("SPX230811C04300000")]
[TestCase("SPX230811C04500000")]
[TestCase("SPX230811C04700000")]
[TestCase("SPX230811P04300000")]
[TestCase("SPX230811P04500000")]
[TestCase("SPX230811P04700000")]
[TestCase("SPX230901C04300000")]
[TestCase("SPX230901C04500000")]
[TestCase("SPX230901C04700000")]
[TestCase("SPX230901P04300000")]
[TestCase("SPX230901P04500000")]
[TestCase("SPX230901P04700000")]
[TestCase("SPY230811C00430000")]
[TestCase("SPY230811C00450000")]
[TestCase("SPY230811C00470000")]
[TestCase("SPY230811P00430000")]
[TestCase("SPY230811P00450000")]
[TestCase("SPY230811P00470000")]
[TestCase("SPY230901C00430000")]
[TestCase("SPY230901C00450000")]
[TestCase("SPY230901C00470000")]
[TestCase("SPY230901P00430000")]
[TestCase("SPY230901P00450000")]
[TestCase("SPY230901P00470000")]
public void ComparesAgainstExternalDataAfterReset(string fileName)
{
var path = Path.Combine("TestData", "greeks", $"{fileName}.csv");
var symbol = ParseOptionSymbol(fileName);
var underlying = symbol.Underlying;

var indicator = new ImpliedVolatility(symbol, 0.04m);
RunTestIndicator(path, indicator, symbol, underlying);

indicator.Reset();
RunTestIndicator(path, indicator, symbol, underlying);
}

[Test]
public override void ComparesAgainstExternalDataAfterReset()
{
// Not used
}

[TestCase(27.50, 450.0, OptionRight.Call, 60, 0.098)]
[TestCase(29.35, 450.0, OptionRight.Put, 60, 0.110)]
[TestCase(37.86, 470.0, OptionRight.Call, 60, 0.044)]
[TestCase(5.74, 470.0, OptionRight.Put, 60, 0.01)] // Volatility of deep OTM American put option will not converge in CRR model
[TestCase(3.44, 430.0, OptionRight.Call, 60, 0.027)]
[TestCase(40.13, 430.0, OptionRight.Put, 60, 0.241)]
[TestCase(17.74, 450.0, OptionRight.Call, 180, 0.022)]
[TestCase(19.72, 450.0, OptionRight.Put, 180, 0.046)]
[TestCase(38.45, 470.0, OptionRight.Call, 180, 0.057)]
[TestCase(0.43, 470.0, OptionRight.Put, 180, 0.01)] // Volatility of deep OTM American put option will not converge in CRR model
[TestCase(1.73, 430.0, OptionRight.Call, 180, 0.016)]
[TestCase(12.46, 430.0, OptionRight.Put, 180, 0.079)]
public void ComparesIVOnCRRModel(decimal price, decimal spotPrice, OptionRight right, int expiry, double refIV)
{
// Under CRR framework
var symbol = Symbol.CreateOption("SPY", Market.USA, OptionStyle.American, right, 450m, _reference.AddDays(expiry));
var indicator = new ImpliedVolatility(_symbol, 0.04m, binomial: true);

var optionTradeBar = new TradeBar(_reference, _symbol, price, price, price, price, 0m);
var spotTradeBar = new TradeBar(_reference, _underlying, spotPrice, spotPrice, spotPrice, spotPrice, 0m);
indicator.Update(optionTradeBar);
indicator.Update(spotTradeBar);

Assert.AreEqual(refIV, (double)indicator.Current.Value, 0.03d);
}

private Symbol ParseOptionSymbol(string fileName)
{
var ticker = fileName.Substring(0, 3);
var expiry = DateTime.ParseExact(fileName.Substring(3, 6), "yyMMdd", CultureInfo.InvariantCulture);
var right = fileName[9] == 'C' ? OptionRight.Call : OptionRight.Put;
var strike = Parse.Decimal(fileName.Substring(10, 8)) / 1000m;
var style = ticker == "SPY" ? OptionStyle.American : OptionStyle.European;

return Symbol.CreateOption(ticker, Market.USA, style, right, strike, expiry);
}

private void RunTestIndicator(string path, ImpliedVolatility indicator, Symbol symbol, Symbol underlying)
{
foreach (var line in File.ReadAllLines(path).Skip(1))
{
var items = line.Split(',');

var time = DateTime.ParseExact(items[0], "yyyyMMdd HH:mm:ss.ffffff", CultureInfo.InvariantCulture);
var price = Parse.Decimal(items[1]);
var spotPrice = Parse.Decimal(items[^1]);
var refIV = Parse.Double(items[2]);

var optionTradeBar = new TradeBar(time.AddSeconds(-1), symbol, price, price, price, price, 0m, TimeSpan.FromSeconds(1));
var spotTradeBar = new TradeBar(time.AddSeconds(-1), underlying, spotPrice, spotPrice, spotPrice, spotPrice, 0m, TimeSpan.FromSeconds(1));
indicator.Update(optionTradeBar);
indicator.Update(spotTradeBar);

// We're not sure IB's parameters and models, we'll accept a larger error from far OTM/ITM & close-to-expiry option
var acceptRange = Math.Max(0.03m, Math.Abs(symbol.ID.StrikePrice - spotPrice) / spotPrice * 30 / (decimal)(symbol.ID.Date - time).TotalDays);
Assert.AreEqual(refIV, (double)indicator.Current.Value, (double)acceptRange);
}
}

[Test]
public override void ResetsProperly()
{
var indicator = new ImpliedVolatility(_symbol, 0.04m);

for (var i = 0; i < 5; i++)
{
var price = 500m;
var optionPrice = Math.Max(price - 450, 0) * 1.1m;

indicator.Update(new TradeBar() { Symbol = _symbol, Low = optionPrice, High = optionPrice, Volume = 100, Close = optionPrice, Time = _reference.AddDays(1 + i) });
indicator.Update(new TradeBar() { Symbol = _underlying, Low = price, High = price, Volume = 100, Close = price, Time = _reference.AddDays(1 + i) });
}

Assert.IsTrue(indicator.IsReady);

indicator.Reset();

TestHelper.AssertIndicatorIsInDefaultState(indicator);
}

[Test]
public override void TimeMovesForward()
{
var indicator = CreateIndicator();

for (var i = 10; i > 0; i--)
{
var price = 500m;
var optionPrice = Math.Max(price - 450, 0) * 1.1m;

indicator.Update(new TradeBar() { Symbol = _symbol, Low = optionPrice, High = optionPrice, Volume = 100, Close = optionPrice, Time = _reference.AddDays(1 + i) });
indicator.Update(new TradeBar() { Symbol = _underlying, Low = price, High = price, Volume = 100, Close = price, Time = _reference.AddDays(1 + i) });
}

Assert.AreEqual(2, indicator.Samples);
}

[Test]
public override void WarmsUpProperly()
{
var period = 5;
var indicator = new ImpliedVolatility("testImpliedVolatilityIndicator", _symbol, period: period);
var warmUpPeriod = (indicator as IIndicatorWarmUpPeriodProvider)?.WarmUpPeriod;

if (!warmUpPeriod.HasValue)
{
Assert.Ignore($"{indicator.Name} is not IIndicatorWarmUpPeriodProvider");
return;
}

// warmup period is 5 + 1
for (var i = 1; i <= warmUpPeriod.Value; i++)
{
var time = _reference.AddDays(i);
var price = 500m;
var optionPrice = Math.Max(price - 450, 0) * 1.1m;

indicator.Update(new TradeBar() { Symbol = _symbol, Low = optionPrice, High = optionPrice, Volume = 100, Close = optionPrice, Time = time });

Assert.IsFalse(indicator.IsReady);

indicator.Update(new TradeBar() { Symbol = _underlying, Low = price, High = price, Volume = 100, Close = price, Time = time });

// At least 2 days data for historical daily volatility
if (time <= _reference.AddDays(3))
{
Assert.IsFalse(indicator.IsReady);
}
else
{
Assert.IsTrue(indicator.IsReady);
}

}

Assert.AreEqual(2 * warmUpPeriod.Value, indicator.Samples);
}

[Test]
public override void AcceptsRenkoBarsAsInput()
{
var indicator = CreateIndicator();
var firstRenkoConsolidator = new RenkoConsolidator(0.5m);
var secondRenkoConsolidator = new RenkoConsolidator(0.5m);
firstRenkoConsolidator.DataConsolidated += (sender, renkoBar) =>
{
Assert.DoesNotThrow(() => indicator.Update(renkoBar));
};

secondRenkoConsolidator.DataConsolidated += (sender, renkoBar) =>
{
Assert.DoesNotThrow(() => indicator.Update(renkoBar));
};

for (int i = 1; i <= 300; i++)
{
var price = 550m - i;
var optionPrice = Math.Max(price - 450, 0) * 1.1m;

var tradeBar1 = new TradeBar(_reference.AddDays(i), _symbol, optionPrice, optionPrice, optionPrice, optionPrice, 150m);
firstRenkoConsolidator.Update(tradeBar1);
var tradeBar2 = new TradeBar(_reference.AddDays(i), _underlying, price, price, price, price, 1200m);
secondRenkoConsolidator.Update(tradeBar2);
}

Assert.AreNotEqual(0, indicator.Samples);
firstRenkoConsolidator.Dispose();
secondRenkoConsolidator.Dispose();
}

[Test]
public override void AcceptsVolumeRenkoBarsAsInput()
{
var indicator = CreateIndicator();
var firstVolumeRenkoConsolidator = new VolumeRenkoConsolidator(100);
var secondVolumeRenkoConsolidator = new VolumeRenkoConsolidator(1000);
firstVolumeRenkoConsolidator.DataConsolidated += (sender, renkoBar) =>
{
Assert.DoesNotThrow(() => indicator.Update(renkoBar));
};

secondVolumeRenkoConsolidator.DataConsolidated += (sender, renkoBar) =>
{
Assert.DoesNotThrow(() => indicator.Update(renkoBar));
};

for (int i = 1; i <= 300; i++)
{
var price = 550m - i;
var optionPrice = Math.Max(price - 450, 0) * 1.1m;

var tradeBar1 = new TradeBar(_reference.AddDays(i), _symbol, optionPrice, optionPrice, optionPrice, optionPrice, 150m);
firstVolumeRenkoConsolidator.Update(tradeBar1);
var tradeBar2 = new TradeBar(_reference.AddDays(i), _underlying, price, price, price, price, 1200m);
secondVolumeRenkoConsolidator.Update(tradeBar2);
}

Assert.AreNotEqual(0, indicator.Samples);
firstVolumeRenkoConsolidator.Dispose();
secondVolumeRenkoConsolidator.Dispose();
}

[Test]
public void AcceptsQuoteBarsAsInput()
{
var indicator = CreateIndicator();

for (var i = 1; i <= 100; i++)
{
var price = 500m;
var optionPrice = Math.Max(price - 450, 0) * 1.1m;

indicator.Update(new QuoteBar {
Symbol = _symbol,
Ask = new Bar(optionPrice, optionPrice, optionPrice, optionPrice),
Bid = new Bar(optionPrice, optionPrice, optionPrice, optionPrice),
Time = _reference.AddDays(1 + i)
});
indicator.Update(new QuoteBar { Symbol = _underlying, Ask = new Bar(price, price, price, price), Time = _reference.AddDays(1 + i) });
}

Assert.AreEqual(200, indicator.Samples);
}

// Not used
protected override string TestFileName => string.Empty;
}
}

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