knockout_calculator.py

def calculate_knockout_value(current_knockout_price, knockout_type, current_base_index, target_index):
    """
    Calculate the corresponding knockout value based on the target index value and knockout type.

    Parameters:
    - current_knockout_price: Current price of the knockout certificate (float)
    - knockout_type: The type of the knockout certificate ('short' or 'long')
    - current_base_index: Current value of the base index (float)
    - target_index: Target value of the base index (float)

    Returns:
    - Corresponding knockout value based on the target index value and knockout type (float)
    """

    if knockout_type.lower() == 'long':
        # Calculate the ratio of the target index to the current base index
        index_ratio = target_index / current_base_index
    elif knockout_type.lower() == 'short':
        # Calculate the ratio for short position
        index_ratio = current_base_index / target_index
    else:
        raise ValueError("Invalid knockout type. Please use 'short' or 'long'.")

    # Calculate the corresponding knockout value using the index ratio
    corresponding_knockout_value = current_knockout_price * index_ratio

    return corresponding_knockout_value

# Example usage:
current_knockout_price = 1.0800
knockout_type = 'long'
current_base_index = 5304.7100
target_index = 5290.0000

result = calculate_knockout_value(current_knockout_price, knockout_type, current_base_index, target_index)
print(f"The corresponding knockout value based on the target index value is: {result:.4f}")