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Python for Finance

You're reading from   Python for Finance Apply powerful finance models and quantitative analysis with Python

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Product type Paperback
Published in Jun 2017
Publisher
ISBN-13 9781787125698
Length 586 pages
Edition 2nd Edition
Languages
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Author (1):
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Yuxing Yan Yuxing Yan
Author Profile Icon Yuxing Yan
Yuxing Yan
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Toc

Table of Contents (17) Chapters Close

Preface 1. Python Basics FREE CHAPTER 2. Introduction to Python Modules 3. Time Value of Money 4. Sources of Data 5. Bond and Stock Valuation 6. Capital Asset Pricing Model 7. Multifactor Models and Performance Measures 8. Time-Series Analysis 9. Portfolio Theory 10. Options and Futures 11. Value at Risk 12. Monte Carlo Simulation 13. Credit Risk Analysis 14. Exotic Options 15. Volatility, Implied Volatility, ARCH, and GARCH Index

Credit spread

Credit spreads (default risk premium) reflect their default risk. For example, to estimate the present value of a coupon payment in two years for an AA rated bond, the discount rate (yield) will be a risk-free rate plus the corresponding spread. For a given credit rating, its credit spread could be found by using historical data. Here is a typical table showing the relationship between credit risk premium (spread) and the credit rating, see the following table:

We thank Prof Adamodar for making the dataset available at his website, http://people.stern.nyu.edu/adamodar/pc/datasets/:

Credit spread

Credit Spread based on credit rating

Spreads, except the last row in the preceding table, have a unit of basic-point, which is the 100th of one percent. For example, or an A- (A minus) rated bond with a maturity of five years, its spared is 83.6 basis points. Since the risk-free is 1.582% (for a 5-year treasury rate), the YTM for this bond will be 2.418%, that is, 0.01582+83.6/100/100. Based on the...

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