#### Overview of this book

Python for Finance
Credits
Acknowledgments
www.PacktPub.com
Preface
Free Chapter
Introduction and Installation of Python
13 Lines of Python to Price a Call Option
Introduction to Modules
Statistical Analysis of Time Series
Index

## Understanding the interpolation technique

Interpolation is a technique used quite frequently in finance. In the following example, we have to find NaN between `2` and `6`. The `pd.interpolate()` function, for a linear interpolation, is used to fill in the two missing values:

```>>>import pandas as pd
>>>import numpy as np
>>>x=pd.Series([1,2,np.nan,np.nan,6])
>>>x.interpolate()
0  1.000000
1  2.000000
2  3.333333
3  4.666667
4  6.000000
```

If the two known points are represented by the coordinates (x0,y0) and (x1,y1), the linear interpolation is the straight line between these two points. For a value x in the interval of (x0,x1), the value y along the straight line is given by the following formula:

Solving this equation for y, which is the unknown value at x, gives the following result:

From the Yahoo! Finance bond page, we can get the following information:

Maturity

Yield

Yesterday

Last Week

Last Month

3 Month

0.05

0.05

0.04

0.03

6 Month

0.08

0.07

0.07...