Developing an options trading web app using Q-learning
The trading algorithm is the process of using computers programmed to follow a defined set of instructions for placing a trade in order to generate profits at a speed and frequency that is impossible for a human trader. The defined sets of rules are based on timing, price, quantity, or any mathematical model.
Problem description
Through this project, we will predict the price of an option on a security for N days in the future according to the current set of observed features derived from the time of expiration, the price of the security, and volatility. The question would be: what model should we use for such an option pricing model? The answer is that there are actually many; Black-Scholes stochastic partial differential equations (PDE) is one of the most recognized.
Note
In mathematical finance, the Black-Scholes equation is necessarily a PDE overriding the price evolution of a European call or a European put under the Black-Scholes model...