Options Pricing Overview

A full stack application that utilizes the Heston Model and Longstaff Schwartz approach to price American and European Options

Access the site at https://www.optionspricerapp.com/

Setup & Deployment

Prerequisites

• Python 3.11
• Node.js (for frontend)
• API keys from:
  • Alpha Vantage (for dividend data)
  • Twelve Data (for stock price data)

Environment Variables

Create a .env file in the backend/ directory with the following variables:

# Required API Keys
ALPHAVANTAGE_API_KEY=your_alphavantage_api_key_here
TWELVE_API_KEY=your_twelve_data_api_key_here

# Optional Supabase Configuration (has defaults)
SUPABASE_URL=https://your-project.supabase.co
SUPABASE_KEY=your_supabase_anon_key_here

Quick Setup: Run the setup script to create your .env file:

cd backend
python setup_env.py

Installation

1. Clone the repository
2. Install backend dependencies:

   cd backend
   pip install -r ../requirements.txt

3. Install frontend dependencies:

   cd web
   npm install

Running Locally

1. Set up environment variables (first time only):

   cd backend
   python setup_env.py

2. Start the backend server:

   cd backend
   python server.py

   The server will start on http://localhost:5000

3. Start the frontend (in a new terminal):

   cd web
   npm start

   The React app will start on http://localhost:3000

4. Test the pricing logic (optional):

   cd backend
   python test_pricing.py

Note: The frontend will automatically connect to the backend API at http://localhost:5000

Usage

In the top left of the application there is a form where users first enter a stock ticker they would like to price an option on. Other parameters (Strike price, time-to-expiry, number of simulations) are selected in the same form. When the parameters are selected, the "Calculate" button is used to begin calculating Options Price. Upon calculation, the application visualizes a sample of 100 of the user's simulated paths, the standard error for American Prices, and a distribution of the returns on the final day.

Built With

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Credits

• Christian Lindler
• Ben DiPrete
• Cole Miller