ESYS (The Estimation System) is a prototype for estimating theoretical option prices on futures. It calculates implied (IV) and historical (HV) volatility, which are required for option pricing, and uses them to build a volatility cone for forecasting. The prototype models the underlying asset price as geometric Brownian motion in discrete time, with a time step expressed in fractions of a year. It consists of class modules, modules, and Excel add-ins (.xlam) that extend Excel's capabilities.
ESYS was developed to test pricing and volatility hypotheses before moving to a full system implementation.
- Denis Khorkin