How does Volcube generate the market price and order flow data?
Volcube is built on complex stochastic algorithms. This has a number of advantages over simulators which rely upon real market data. Firstly, it means Volcube is always available and not dependent on an exchange’s opening hours. Secondly, it means the games in Volcube can never be exhausted compared to using historical datasets. And thirdly it gives users and tutors fine-grained control over the kind of simulations they experience. This means training can be precisely targeted to the areas in which the user is interested.
Algorithms in Volcube drive the options order flow, the evolution of implied volatility and the price changes in the underlying market. These are built on random stochastic process. They contain feedback mechanisms so that order flow affects the level of implied and vice versa. This is modelled on the real world of options trading. The exact algorithms are not published, partly because they are proprietary to Volcube, but also to avoid users trying to trade ‘to the algorithm’ instead of focussing on becoming better option traders.
When designing Volcube, our main aim was sufficient realism for educational purposes. If the simulations were hyper-real, that would be sub-optimal for teaching because nothing might happen for hours on end. If on the other hand the market was wildly unrealistic, the lessons taught might not be valid. Having tested Volcube’s market dynamics on hundreds of real option traders, we are happy that we have achieved the correct balance between realism and the optimal training environment.
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