Financial Modelling in Python

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Contents

1 Welcome to Python 1

1.1 Why Python? 1

1.1.1 Python is a general-purpose high-level programming language 1

1.1.2 Python integrates well with data analysis, visualisation and

GUI toolkits 2

1.1.3 Python ‘plays well with others’ 2

1.2 Common misconceptions about Python 2

1.3 Roadmap for this book 3

2 The PPF Package 5

2.1 PPF topology 5

2.2 Unit testing 6

2.2.1 doctest 6

2.2.2 PyUnit 7

2.3 Building and installing PPF 7

2.3.1 Prerequisites and dependencies 7

2.3.2 Building the C++ extension modules 8

2.3.3 Installing the PPF package 9

2.3.4 Testing a PPF installation 9

3 Extending Python from C++ 11

3.1 Boost.Date

Time types 11

3.1.1 Examples 12

3.2 Boost.MultiArray and special functions 17

3.3 NumPy arrays 19

3.3.1 Accessing array data in C++ 19

3.3.2 Examples 23

4 Basic Mathematical Tools 27

4.1 Random number generation 27

4.2 N(.) 28

4.3 Interpolation 29

4.3.1 Linear interpolation 31

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vi Contents

4.3.2 Loglinear interpolation 32

4.3.3 Linear on zero interpolation 32

4.3.4 Cubic spline interpolation 33

4.4 Root finding 35

4.4.1 Bisection method 35

4.4.2 Newton–Raphson method 36

4.5 Linear algebra 38

4.5.1 Matrix multiplication 38

4.5.2 Matrix inversion 38

4.5.3 Matrix pseudo-inverse ...