TachVault's SaaS Derivative Options pricing

Getting Started with Web
Service API – Part I

Outline
 TachVault Pricing Engine
 Our SaaS platform
 Options valuation with Web GUI

TachVault Pricing Engine
 Asset Classes supported (In Free
Trial)
◦ Equity (~8000 US and Canadian stocks)
◦ Futures (COMEX/NYMEX traded)
◦ FOREX (US/Canadian)

 Option types supported (In Free Trial)
◦ Plain Vanilla (American/European)
◦ Option spreads
◦ Exotic options (Asian, Barrier, Chooser,
Look Back etc.)

 SaaS Web Service model
◦ Much cheaper than in-house development
or licensing
◦ Integration and scalability
 You can easily integrate with any in-house
modeling tools (VBA, R, Python)
 Scalable to support unlimited concurrent
requests and only limited by cloud
infrastructure
◦ Work anywhere.

 Our SaaS platform
◦ Based on RESTful web services
◦ TachVault is responsible for upgrades,
uptime and security
◦ Can be integrated from any tools and third
party software
◦ Follows simple syntax widely used by
most popular SaaS platforms
 Syntax tab documents the SaaS request syntax

Value options with Web GUI
 Target users
◦ Option traders/investors with the need for
portable option valuation application
based on *real-time market data
 * ~15 min delayed market data for equity and
FX in Free Trial
 * Futures options are based on previous day
settlement prices in Free Trial

 Key features
◦ Can be accessed from any computing device
connected to the Internet
◦ Provided with Catalog of option pricing
request templates
◦ Request templates can be customized,
added to user collections and accessed from
anywhere
 Ex: Call option request for Apple Inc. can be
created from equity vanilla option template
◦ Stores history of requests in local browser
storage

 Default Catalogs

 Default Catalogs
◦ Lists asset classes and option types
supported in Free Trial
◦ Lists option valuation requests for each
asset class/option type supported as
templates
◦ Click on the template request shows
possible lists of parameters and allowed
values

 Selected request parameters (not
obvious)
◦ _rateType: Allows a user to specify preferred
“risk-free” rate used in valuation
 LIBOR or fed rate
◦ _volType: Allows a user to select the type of
volatility modeling
 Implied volatility (based on previous days historical
option prices)
 Historical volatility (GARCH)
◦ _vol: Allows user to specify a constant
volatility used in valuation (override value)

 Selected request parameters (not
obvious)
◦ _method: Allows a user to specify option
valuation method
 Closed analytical, Binomial or Monte-Carlo
◦ _legs: Allows a user specify legs of an option
spread
 Syntax: (leg), (leg), (leg)….
 Ex: Butterfly spread legs
(_position=long,_option=call,_strike=145,_maturity=2015/11/20),(_position=long,_option
=call,_strike=165,_maturity=2015/11/20),(_position=short,_option=call,_strike=ATM,_m
aturity=2015/11/20),(_position=short,_option=call,_strike=ATM,_maturity=2015/11/20)

 User collections
◦ User collections allows users to organize
and store preferred option requests
◦ User collections are stored with user
profile in the TachVault web server. Thus
can be accessed from anywhere
◦ Users can:
 Create a new collection
 Ex: Financial equities, Tech sector equities…
 Add frequently exercised option requests to
chosen collections

 User collections

 Option valuation requests
◦ Requests can be added to collections
◦ Requests can be modified and saved
◦ One can execute a request for option
valuation from any computing device on
the Internet
◦ Valuation output:
 Shown in human readable text formatted with
JSON syntax.

 Option valuation output:
◦ Main elements
 Message:
 outcome:
 request: { }
 response: { }

 Main elements: Message, Outcome
◦ Values of Message indicate whether the
request is successfully executed or not.
 Possible Values: Success/Failure
◦ Values of Outcome indicate the same
information as Message. But can be
easily compared by automated tools
 0 indicate Success and 1 indicate Failure.

 Main elements: Request
◦ Request block indicates the request
parameters as received by the pricing
engine
 Example:
 "request": {
 "equity symbol": "RY",
 "maturityDate": "2016-Jan-15",
 "option": "put",
 "strike": 54.2,
 "style": "american"
 },

 Main elements: Response
◦ Response block shows the values of response
elements such as option Greeks and option price.
 Example:
 "response": {
 "Volatility": 0.2504893407184784,
 "greeks (BS)": {
 "delta": -0.5034209714402521,
 "gamma": 0.04761497137430514,
 "theta": -3.943525425566568,
 "vega": 0.2324708078992869
 },
 "last underlying price": 55.58,
 "option price": "3.698",
 "underlying trade date": "2015-Sep-09"
 }

 Plain Vanilla option response
◦ Main elements.
 greeks (BS) : {delta, gamma, theta, vega}
 Greek values for the option based on Black Scholes
formula
 last underlying price:
 The price of underlying asset used in the option pricing
 option price
 The value of option
 Volatility
 Volatility for the given option maturity and strike price
 underlying trade date
 The trade date of underlying asset at the pricing point

 Exotic option Response
◦ Main elements.
 greeks (BS) : {delta, omega, theta, vega}
 option price
 The value of option
 Volatility
 Volatility for the given option maturity and strike price
 Vanilla option price
 The value of vanilla option
 The trade date of underlying asset.

 Option spread Response
◦ Main elements.
 Legs: [leg, leg, leg]
 Shows the option values of each leg as separate
blocks { }
 greeks (BS) : {delta, omega, theta, vega}
 spread price
 The value of spread
 The trade date of underlying asset.

Coming up..
 Part II of Getting Started series will
explain integration of TachVault web
services API with Excel/VBA.

Getting Started with Web
Service API – Part II
Integration of TachVault web
services API with Excel/VBA

Outline
 Excel-VBA Web Service Framework
 VBA-Web Library
 Example I: Pricing and Sensitivity
Analysis of Vanilla options
 Example II: Pricing Equity Asian
options
 Example III: Pricing Futures option
spreads

Excel-VBA Web Service
Framework
Pricing Engine
REST
Server
Market
Data feed
Option Request
Pricing
Response
Your Excel
Derivative App
TachVault Pricing
Engine

Excel-VBA Web Service
Framework
Pricing
Engine
RES
T
Serv
er
Mark
et
Data
feed
TachVault Pricing
Engine
Your
pricing
application
Web-VBA
Library
WebRequest
WebResponse
Internet

VBA-Web Library
 Open source VBA library for REST
client
 Reference: https://github.com/VBA-
tools/VBA-Web
 What tools I need to get started?
◦ You only need the VBA modules
embedded in the Option-Pricing.xlsm
Excel workbook linked as the Demo Excel
Client here.

Example I: Pricing and
Sensitivity Analysis of Vanilla
options
 Construct a VBA-Web WebClient
Public Property Get Client() As WebClient
If pClient Is Nothing Then
Set pClient = New WebClient
pClient.BaseUrl = http://cp.saas-
tachvault.com/JSON/EquityOption/Vanilla
End If
Set Client = pClient
End Property

options
 Construct Request with required
parameters
Public Function PriceAPI(Req As VanillaOptionReq) As WebResponse
Dim Request As New WebRequest
Request.AddQuerystringParam "_option", Req.optionType
Request.AddQuerystringParam "_symbol", Req.symbol
Request.AddQuerystringParam "_strike", Req.strike
Dim mat As String
mat = Format(Req.maturity, "yyyy/mm/dd")
Request.AddQuerystringParam "_maturity", mat
Request.AddQuerystringParam "_ratetype", Req.rateType
Request.AddQuerystringParam "_token", Req.Token
Request.AddQuerystringParam "_style", Req.style
Request.AddQuerystringParam "_volType", Req.volType
Request.AddQuerystringParam "_vol", Req.vol

options
 Send request to TachVault pricing
engine
Public Function PriceAPI(Req As VanillaOptionReq) As WebResponse
Dim mat As String
Set PriceAPI = Client.Execute(Request)
End Function

options
 Process the response (in JSON
format)
Set Response = EquityVanilla.PriceAPI(Req)
If Response.StatusCode = WebStatusCode.Ok Then
Me.[Volatility] = Response.Data("response")("Volatility")
Me.[option_price] = Response.Data("response")("option price")
Me.[Underlying] = Response.Data("response")("last underlying
price")
Me.[OutStrike] = Req.strike
Me.[OutMaturity] = Req.maturity
Me.[Delta] = Response.Data("response")("greeks (BS)")("delta")
Me.[Gamma] = Response.Data("response")("greeks
(BS)")("gamma")
Me.[Theta] = Response.Data("response")("greeks (BS)")("theta")
Me.[Vega] = Response.Data("response")("greeks (BS)")("vega")
Me.[Message] = Response.Data("Message")
Else
Me.[Message] = "Error: " & Response.Data("Message")

Example II: Pricing Equity Asian
options
 Construct a Web client with the URL:
pClient.BaseUrl = "http://cp.saas-
tachvault.com/JSON/EquityOption/Average"
 Populate the Request with required
parameters
Public Function PriceAPI(Req As AverageOptionReq) As WebResponse
Request.AddQuerystringParam "_averageType", Req.averageType
Dim mat As String

options
 Send request to TachVault Pricing
engine REST server
Public Function PriceAPI(Req As AverageOptionReq) As WebResponse
Request.AddQuerystringParam "_averageType", Req.averageType
Dim mat As String
Set PriceAPI = Client.Execute(Request)
End Function

options
 Process the Response (in JSON
format)
Set Response = EquityAverage.PriceAPI(Req)
If Response.StatusCode = WebStatusCode.Ok Then
Me.[aVolatility] = Response.Data("response")("Volatility")
Me.[aPrice] = Response.Data("response")("average option price")
Me.[aUnderlying] = Response.Data("response")("last underlying
price")
Me.[aOutStrike] = Req.strike
Me.[aMessage] = Response.Data("Message")
Else
Me.[aMessage] = "Error: " & Response.Data("Message")
End If

Example III: Pricing Futures
option spread
 Construct the Web Client with the URL
for futures Option spread
parameters
 Send the request to TachVault pricing
engine REST server
 Process the Response as for the
Vanilla option

General Access Framework
 Construct the Web Client with the URL
specific for each option family
◦ The URL path’s indicate the type of option
family: Equity vanilla, Futures Spread,
FXBarrier, etc.
parameters
◦ Most of the parameters are specific to
each option family and the rest are
common such as _rateType and _volType

General Access Framework
 Send the request to TachVault pricing
engine
◦ Most of the parameters are specific to
each option family and the rest are
common such as _rateType and _volType
 Process the JSON Response

Exception Handling
 Handle Pricing engine exceptions
◦ All exceptions in pricing engine are
channeled to clients.
 REST Status Code equals Internal error
Indicate error in processing
 The “Message” response parameter indicate
the human readable error message
◦ VBA-Web module WebResponse
captures the status code and message.
 How to check?
 If Response.StatusCode = WebStatusCode.Ok Then

References
 The Excel demo workbook for pricing options can
be found here.
◦ http://tachvault.com/demo/Option-Pricing.xlsm
 The Power Point presentation can be found in
here.
◦ http://tachvault.com/demo/GettingStartedWebServiceAPI-
Part-II.pdf

Coming up..
 Part III of Getting Started series will
explain integration of TachVault web
services API with Python.

TachVault's SaaS Derivative Options pricing

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