---
title: CC junk Rookley
tags: research
---

# Rookley's method summarized by Ning

:::info
This document summarizes feedback from Ning and my questions after running his codes.
:::

## Python scripts by Franziska Wehrmann

1. The file with the name "risk_neutral_density.py" defines a function that returns the calculated result of a State-Price Density (SPD).
2. The file with the name "smoothing.py", using the data set to be inputted, defines in the end a function that returns the estimated values of inputs that are needed in the function defined in "risk_neutral_density.py".
3. The file with the name "plotting.py" returns to
1. scatterplots of data for all possibilities of tau_day (dates to maturity) given the fixed date;
2. calculated SPDs for all possibilities of tau_day given the fixed date;
3. volatility smile + 1st derivative of implied volatiloty + 2nd derivative of implied volatility for all possibilities of tau_day (dates to maturity) given the fixed date; (:question: green for implied volatility $\sigma$, blue, and green? )
4. For each possibility of tau_day, the scatterplot +implied volatility together with its 1st and 2nd derivatives plots+ the calculated SPD.
4. The file with the name "CrypOpt_RiskNeutralDensity.py" is the main body of the codes. One uses this part to input the data set of a fixed date and gets a output called "res" that contains the following values:
- 'df': the data columns of ['M', 'iv', 'S', 'K'] (moneyness, implied volatility, underlying price, strike price) for all possibilities of tau_day given the fixed date
- 'M': moneyness (underlying prices divided by strike prices)
- 'smile': implied volatility
- 'first': first derivative of implied volatility
- 'second': second derivative of implied volatility
- 'K': strike prices
- 'q': (local polynomial kernel) SPD
- 'S': underlying prices (corrected for future dividends)

## Input

The file "trades_clean.csv" provided by Ms. Franziska Wehrmann has the following varaibles and descriptions:

| Index | Column | Description |
|---|----|---|
|1 | date|trading date in the format of "2020/3/4"|
|2 | P| :question: |
|3 |S| underling price|
|4 |K|strike price |
|5 | tau| days to maturity divided by 365|
|6 |tau_day| days to maturity in days|
|7 |iv| implied volatility |
|8 |M| Moneyness (underlying prices divdided by strike prices)|
|9 |r| risk-free rate |
|10 |option| 'P': put, 'C': call
|11 | direction| 'sell', 'buy'|

## Output of Franziska's data

### Fig A. Smoothing the implied volatility at different times to maturity


### Fig B. Risk-neutral probability


### Fig C. Why there are three different colors of implied volatility?(:question:)


### Fig D. Whats are the differences between the implied volatility and that in Figs A, B, C? Why the implied volatility in orange color is negative?




## Output of the data from BRC