Book Image

Python for Finance

By : Yuxing Yan
Book Image

Python for Finance

By: Yuxing Yan

Overview of this book

A hands-on guide with easy-to-follow examples to help you learn about option theory, quantitative finance, financial modeling, and time series using Python. Python for Finance is perfect for graduate students, practitioners, and application developers who wish to learn how to utilize Python to handle their financial needs. Basic knowledge of Python will be helpful but knowledge of programming is necessary.
Table of Contents (14 chapters)
13
Index

The if() function


The present value of a growing perpetuity has the following formula:

Here, C is the first cash flow occurring at the end of the first period, R is the effective periodic rate, and g is the constant growth rate. The second and the third future cash flows will be and , respectively. A necessary condition for the correctness of equation (3) is that the discount rate should be greater than the growth rate, that is, R should be greater than g. What is the present value if C is $10, R is 10 percent, and g is 12 percent? The wrong answer is -500. For these similar cases, we could use the if() function to print an error message instead of offering the wrong answer, as shown in the following code:

def pv_growing_perpetuity(c,r,g):
    if(r<g):
        print("r<g !!!!")
    else:
        return(c/(r-g))    

We could try different sets of input values, as shown in the following code:

>>>pv_growing_perpetuity(10,0.1,0.08)
499.9999999999999
>>>pv_growing_perpetuity...