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The book is a condensed introduction to Python and its data science related libraries such as NumPy, Pandas, and Matplotlib. The illustrative examples we use are associated with the financial markets.
Financial modeling is the task of building an abstract representation (a model) of a real world financial situation. [1] This is a mathematical model designed to represent (a simplified version of) the performance of a financial asset or portfolio of a business, project , or any other investment.
Financial models with long-tailed distributions and volatility clustering have been introduced to overcome problems with the realism of classical financial models. These classical models of financial time series typically assume homoskedasticity and normality and as such cannot explain stylized phenomena such as skewness, heavy tails, and volatility clustering of the empirical asset returns in ...
Mathematical finance, also known as quantitative finance and financial mathematics, is a field of applied mathematics, concerned with mathematical modeling in the financial field. In general, there exist two separate branches of finance that require advanced quantitative techniques: derivatives pricing on the one hand, and risk and portfolio ...
These people become known as "financial engineers" ("quant" is a term that includes both rocket scientists and financial engineers, as well as quantitative portfolio managers). [13] This led to a second major extension of the range of computational methods used in finance, also a move away from personal computers to mainframes and ...
Python: the "statsmodels" package includes models for time series analysis – univariate time series analysis: AR, ARIMA – vector autoregressive models, VAR and structural VAR – descriptive statistics and process models for time series analysis. R: the standard R stats package includes an arima function, which is documented in "ARIMA ...
R is a programming language for statistical computing and data visualization. It has been adopted in the fields of data mining, bioinformatics and data analysis. [9] The core R language is augmented by a large number of extension packages, containing reusable code, documentation, and sample data. R software is open-source and free software.
An affine term structure model is a financial model that relates zero-coupon bond prices (i.e. the discount curve) to a spot rate model. It is particularly useful for deriving the yield curve – the process of determining spot rate model inputs from observable bond market data.