Book Image

Python for Finance

By : Yuxing Yan
Book Image

Python for Finance

By: Yuxing Yan

Overview of this book

Table of Contents (20 chapters)
Python for Finance
About the Author
About the Reviewers

Continuously compounded interest rate

In the previous section, our compounding frequency could be annual (m=1), semiannual (2), quarterly (4), monthly (12), or daily (365). If the compounding frequency increases further and further, such as by the hour, minute, and second, the limit is called continuously compounded. The following is the conversion formula:

Here, Rc is the continuously compounded rate, ln() is a natural log function, APR is the annual percentage rate, and m is the compounding frequency per year. For the natural log function, refer to the following code:

>>>import math

For example, if a given APR of 5 percent is compounded semiannually, its corresponding continuously compounded rate will be 4.9385225 percent, as shown in the following code:

>>>import math

In the next chapter, for a call option, the risk-free rate used is continuously...