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Mastering Python for Finance

Mastering Python for Finance

By : James Ma Weiming
2.8 (9)
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Mastering Python for Finance

Mastering Python for Finance

2.8 (9)
By: James Ma Weiming

Overview of this book

The second edition of Mastering Python for Finance will guide you through carrying out complex financial calculations practiced in the industry of finance by using next-generation methodologies. You will master the Python ecosystem by leveraging publicly available tools to successfully perform research studies and modeling, and learn to manage risks with the help of advanced examples. You will start by setting up your Jupyter notebook to implement the tasks throughout the book. You will learn to make efficient and powerful data-driven financial decisions using popular libraries such as TensorFlow, Keras, Numpy, SciPy, and scikit-learn. You will also learn how to build financial applications by mastering concepts such as stocks, options, interest rates and their derivatives, and risk analytics using computational methods. With these foundations, you will learn to apply statistical analysis to time series data, and understand how time series data is useful for implementing an event-driven backtesting system and for working with high-frequency data in building an algorithmic trading platform. Finally, you will explore machine learning and deep learning techniques that are applied in finance. By the end of this book, you will be able to apply Python to different paradigms in the financial industry and perform efficient data analysis.
Table of Contents (16 chapters)
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1
Section 1: Getting Started with Python
3
Section 2: Financial Concepts
9
Section 3: A Hands-On Approach

Calculating the yield to maturity

The yield to maturity (YTM) measures the interest rate, as implied by the bond, which takes into account the present value of all the future coupon payments and the principal. It is assumed that bond holders can invest received coupons at the YTM rate until the maturity of the bond; according to risk-neutral expectations, the payments received should be the same as the price paid for the bond.

Let's take a look at an example of a 5.75% bond that will mature in 1.5 years with a par value of 100. The price of the bond is $95.0428 and coupons are paid semi-annually. The pricing equation can be stated as follows:

Here:

  • c is the coupon dollar amount paid at each time period
  • T is the time period of payment in years
  • n is the coupon payment frequency
  • y is the YTM that we are interested in solving

To solve the YTM is typically a complex process...

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