Book Image

Python for Finance - Second Edition

By : Yuxing Yan
5 (1)
Book Image

Python for Finance - Second Edition

5 (1)
By: Yuxing Yan

Overview of this book

This book uses Python as its computational tool. Since Python is free, any school or organization can download and use it. This book is organized according to various finance subjects. In other words, the first edition focuses more on Python, while the second edition is truly trying to apply Python to finance. The book starts by explaining topics exclusively related to Python. Then we deal with critical parts of Python, explaining concepts such as time value of money stock and bond evaluations, capital asset pricing model, multi-factor models, time series analysis, portfolio theory, options and futures. This book will help us to learn or review the basics of quantitative finance and apply Python to solve various problems, such as estimating IBM’s market risk, running a Fama-French 3-factor, 5-factor, or Fama-French-Carhart 4 factor model, estimating the VaR of a 5-stock portfolio, estimating the optimal portfolio, and constructing the efficient frontier for a 20-stock portfolio with real-world stock, and with Monte Carlo Simulation. Later, we will also learn how to replicate the famous Black-Scholes-Merton option model and how to price exotic options such as the average price call option.
Table of Contents (23 chapters)
Python for Finance Second Edition
Credits
About the Author
About the Reviewers
www.PacktPub.com
Customer Feedback
Preface
Index

How to merge different datasets


It is a common task to merge different datasets, such as merging index data with stock data and the like. Thus, it is quite important to understand the mechanism of merging different datasets. Here, the pandas.merge() function is discussed:

import pandas as pd
import scipy as s
x= pd.DataFrame({'key': ['K0', 'K1', 'K2', 'K3'],
                 'A': ['A0', 'A1', 'A2', 'A3'],
                 'B': ['B0', 'B1', 'B2', 'B3']})
y = pd.DataFrame({'key': ['K0', 'K1', 'K2', 'K6'],
                 'C': ['C0', 'C1', 'C2', 'C3'],
                 'D': ['D0', 'D1', 'D2', 'D3']})

The sizes of both x and y are 4 by 3, that is, four rows and three columns; see the following code:

print(sp.shape(x))
print(x)

The output is shown here:

print(sp.shape(y))
print(y)

Assume that we intend to merge them based on the variable called key, a common variable shared by both datasets. Since the common values of this variable are K0, K1 and K2. The final result should have three rows and five...