Optiver is a Market Maker and a trading firm that deals in listed derivatives, cash equities, Exchange-Traded Funds(ETFs), bonds, and Foreign Exchange(ForEx). Optiver has hosted a challenge inviting Data Enthusiasts from all over the world to forecast the Volatility of stocks. This challenge is being hosted in partnership with Kaggle, the world’s leading community for Data Science.
Getting the Basics Right
Volatility of a stock refers to the fluctuation of its price as a function of time. A stock whose value changes more rapidly and by greater amounts is more volatile that a stock that whose value remains stable. Various trading companies and financial institutions around the world deal in derivatives, which are complex financial instruments that are affected by the price of stocks. Therefore, it is of utmost importance to these organizations to get the volatility of these financial instruments right because a lot is at stake. Although there are very complex and sophisticated models that are already being used by these organizations, it is important to continuously improve and improvise these models. And what can be a better platform to host a Data Science Competition.
It is very possible that you might not know much about all these financial instruments and how they work, as is the case with most data scientists. However, getting the basics of the problem right is very important for any data science problem. Therefore, to address this gap of knowledge, Optiver has also published a video on Youtube explaining the basics of financial markets and financial instruments. The video explains these complex topics with utmost simplicity and you will have a good idea about financial markets and instruments after going through the video. The same video has been embedded below-
The Dataset and Competition
The dataset will consist of data about the stock market. In particular, it will contain information about the order book- the top 2 competitive ask(selling) and bid(buying) prizes, and the trades that were executed. This data will be contained in 2 different files, one for most competitive bid and ask prices and the other for trades that were executed. This information is provided in the dataset with a resolution of 1 second, i.e, there is one entry of data containing these fields for each second.
Your task will be to forecast the volatility of a stock over a window of a period of 10 minutes. Your predictions will be evaluated by the Root Mean Square Percentage Error(RMSPE) metric.
For more information about the data, and how to use it, you can refer to their sample Notebook on Kaggle, here. The Notebook also contains how volatility is calculated.
Timelines
The competition began on 28th June 2021. And while the final submission deadline is on 27th September 2021, the deadline for entry into the competition and team merger is 20th September 2021. After the final submission deadlines, real market data will be run against some of the selected notebooks yielding the best results. This real market data will be used for the final ranking on the leaderboard. This stage will last until 10th January 2022 which will be the date the competition ends. So far, there are already 1,499 competitors from 1,376 teams who have made 13,590 entries.
Prizes
Optiver is shelling out huge sums of money for those who are able to forecast the volatility of these stocks with great accuracy. The first 4 positional holders will get $25k, $20k, $15k, and $10k respectively, whereas everyone from rank 5 to 10 will be getting $5k each. This takes the total amount of prize money to $100k.
To be a part of the challenge, you just need to have a Kaggle Account. To know more about this challenge and participate in it, click here.
You can learn more about Optiver, click here.
You might want to take a look at the Gravitational Wave Detection challenge as well, click here.