Simple simulator for investors
Project description
cvxsimulator
Given a universe of $m$ assets we are given prices for each of them at time $t_1, t_2, \ldots t_n$, e.g. we operate using an $n \times m$ matrix where each column corresponds to a particular asset.
In a backtest we iterate in time (e.g. row by row) through the matrix and allocate positions to all or some of the assets. This tool shall help to simplify the accounting. It keeps track of the available cash, the profits achieved, etc.
Modus operandi
The simulator shall be completely agnostic as to the trading policy/strategy. Our approach follows a rather common pattern:
We demonstrate those steps with somewhat silly policies. They are never good strategies, but are always valid ones.
Create the portfolio object
The user defines a portfolio object by loading a frame of prices and initialize the initial amount of cash used in our experiment:
import pandas as pd
from cvx.simulator.portfolio import build_portfolio
prices = pd.read_csv(Path("resources") / "price.csv", index_col=0, parse_dates=True, header=0).ffill(
portfolio = build_portfolio(prices=prices, initial_cash=1e6)
It is also possible to specify a model for trading costs.
Loop through time
We have overloaded the __iter__
and __setitem__
methods to create a custom loop.
Let's start with a first strategy. Each day we choose two names from the universe at random.
Buy one (say 0.1 of your portfolio wealth) and short one the same amount.
for before, now, state in portfolio:
# pick two assets at random
pair = np.random.choice(portfolio.assets, 2, replace=False)
# compute the pair
stocks = pd.Series(index=portfolio.assets, data=0.0)
stocks[pair] = [state.nav, -state.nav] / state.prices[pair].values
# update the position
portfolio[now] = 0.1 * stocks
A lot of magic is hidden in the state variable. The state gives access to the currently available cash, the current prices and the current valuation of all holdings.
Here's a slightly more realistic loop. Given a set of $4$ assets we want to implmenent the popular $1/n$ strategy.
for _, now, state in portfolio:
# each day we invest a quarter of the capital in the assets
portfolio[now] = 0.25 * state.nav / state.prices
Note that we update the position at time now
using a series of actual stocks rather than weights or cashpositions.
Future versions of this package may support such conventions, too.
Analyse results
The loop above is filling up the desired positions. The portfolio object is now ready for further analysis. It is possible dive into the data, e.g.
portfolio.nav
portfolio.cash
portfolio.equity
...
The dirty path
Some may know the positions they want to enter for eternity. Running through a loop is rather non-pythonic waste of time in such a case. It is possible to completely bypass this step by submitting a frame of positions together with a frame of prices when creating the portfolio object.
Poetry
We assume you share already the love for Poetry. Once you have installed poetry you can perform
poetry install
to replicate the virtual environment we have defined in pyproject.toml.
Kernel
We install JupyterLab within your new virtual environment. Executing
./create_kernel.sh
constructs a dedicated Kernel for the project.
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