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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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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

Chapter 10. Options and Futures

In modern finance, the option theory (including futures and forwards) and its applications play an important role. Many trading strategies, corporate incentive plans, and hedging strategies include various types of options. For example, many executive incentive plans are based on stock options. Assume that an importer located in the US has just ordered a piece of machinery from England with a payment of £10 million in three months. The importer has a currency risk (or exchange rate risk). If the pound depreciates against the US dollar, the importer would be better off since he/she pays less US dollars to buy £10 million. On the contrary, if the pound appreciates against the US dollar, then the importer would suffer a loss. There are several ways that the importer could avoid or reduce such a risk: buy pounds right now, enter a futures market to buy pounds with a fixed exchange rate determined today, or long a call option with a fixed exercise...

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