Python for Finance: Analyze Big Financial Data

Further Reading

Useful references in book form for the topics covered in this chapter are:

Delbaen, Freddy and Walter Schachermayer (2004): The Mathematics of Arbitrage.

Springer Verlag, Berlin, Heidelberg.

Fletcher, Shayne and Christopher Gardner (2009): Financial Modelling in Python.

John Wiley & Sons, Chichester, England.

Hilpisch, Yves (2015): Derivatives Analytics with Python. Wiley Finance, Chichester,

England. http://derivatives-analytics-with-python.com.

Williams, David (1991): Probability with Martingales. Cambridge University Press,

Cambridge, England.

For the original research papers defining the models cited in this chapter, refer to the

“Further Reading” sections in subsequent chapters.

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Cf. the book by Delbaen and Schachermayer (2004) for a comprehensive review and details of the mathematical

machinery involved. See also Chapter 4 of Hilpisch (2015) for a shorter introduction, in particular for the discrete time

version.

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The strategy would involve selling an option at a price of 2.5 USD and buying 0.25 stocks for 2.5 USD. The payoff

of such a portfolio is 0 no matter what scenario plays out in the simple economy.

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Cf. Williams (1991) on the probabilistic concepts.

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Cf. Delbaen and Schachermayer (2004).

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Adding a time component is actually a straightforward undertaking, which is nevertheless not done here for the ease

of the exposition.

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For the pricing of, for example, short-dated options, this assumption seems satisfied in many circumstances.

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A unit zero-coupon bond pays exactly one currency unit at its maturity and no coupons between today and maturity.

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See Chapter 13 for the basics of object-oriented development in Python. Here, and for the rest of this part, we

deviate from the standard PEP 8 naming conventions with regard to Python class names. PEP 8 recommends using

“CapWords” or “CamelCase” convention in general for Python class names. We rather use the function name convention

as mentioned in PEP 8 as a valid alternative “in cases where the interface is documented and used primarily as a

callable.”

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On this concept see also Fletcher and Gardner (2009), who use market environments extensively.