Essential Python Libraries for Finance
numpy: Offers support for large, multi-dimensional numerical arrays and matrices.
Essential for numerical optimization and model calibration in finance.
Essential Python Libraries for Finance
numpy: Offers support for large, multi-dimensional numerical arrays and matrices.
Essential for numerical optimization and model calibration in finance.
pandas: Ideal for data manipulation and analysis. Simplifies importing data from
various file formats and handling time-series data, crucial for financial analysis.
Essential Python Libraries for Finance
numpy: Offers support for large, multi-dimensional numerical arrays and matrices.
Essential for numerical optimization and model calibration in finance.
pandas: Ideal for data manipulation and analysis. Simplifies importing data from
various file formats and handling time-series data, crucial for financial analysis.
matplotlib: A plotting library for creating static, interactive, and animated
visualizations, widely used for financial data visualization.
Essential Python Libraries for Finance
numpy: Offers support for large, multi-dimensional numerical arrays and matrices.
Essential for numerical optimization and model calibration in finance.
pandas: Ideal for data manipulation and analysis. Simplifies importing data from
various file formats and handling time-series data, crucial for financial analysis.
matplotlib: A plotting library for creating static, interactive, and animated
visualizations, widely used for financial data visualization.
tensorflow/keras: A deep learning framework that is used for predictive
analytics and quantitative analysis in finance, especially in algorithmic trading.
Essential Python Libraries for Finance
numpy: Offers support for large, multi-dimensional numerical arrays and matrices.
Essential for numerical optimization and model calibration in finance.
pandas: Ideal for data manipulation and analysis. Simplifies importing data from
various file formats and handling time-series data, crucial for financial analysis.
matplotlib: A plotting library for creating static, interactive, and animated
visualizations, widely used for financial data visualization.
tensorflow/keras: A deep learning framework that is used for predictive
analytics and quantitative analysis in finance, especially in algorithmic trading.
scikit-learn: Machine learning library useful for predictive data analysis, widely
applied in credit scoring and market analysis.
Essential Python Libraries for Finance
numpy: Offers support for large, multi-dimensional numerical arrays and matrices.
Essential for numerical optimization and model calibration in finance.
pandas: Ideal for data manipulation and analysis. Simplifies importing data from
various file formats and handling time-series data, crucial for financial analysis.
matplotlib: A plotting library for creating static, interactive, and animated
visualizations, widely used for financial data visualization.
tensorflow/keras: A deep learning framework that is used for predictive
analytics and quantitative analysis in finance, especially in algorithmic trading.
scikit-learn: Machine learning library useful for predictive data analysis, widely
applied in credit scoring and market analysis.
PySpark: Facilitates big data processing required in high-frequency trading and
real-time risk management through distributed computing.
Limitations of Python (in Finance and in general)
Limitations of Python (in Finance and in general)
Performance Overhead: Interpreted nature can lead to slower execution
compared to compiled languages like C++, which is often a critical factor in
high-frequency trading.
Limitations of Python (in Finance and in general)
Performance Overhead: Interpreted nature can lead to slower execution
compared to compiled languages like C++, which is often a critical factor in
high-frequency trading.
Parallel Computing: Global Interpreter Lock (GIL) can be a bottleneck for
multi-threaded applications, limiting the ability to perform parallel tasks efficiently,
a domain where C++ excels with its concurrency support.
Limitations of Python (in Finance and in general)
Performance Overhead: Interpreted nature can lead to slower execution
compared to compiled languages like C++, which is often a critical factor in
high-frequency trading.
Parallel Computing: Global Interpreter Lock (GIL) can be a bottleneck for
multi-threaded applications, limiting the ability to perform parallel tasks efficiently,
a domain where C++ excels with its concurrency support.
Dynamic Typing: While dynamic typing offers flexibility, it can result in runtime
errors that are caught during compilation in statically-typed languages like C++,
making Python less reliable for systems where correctness is paramount.
Limitations of Python (in Finance and in general)
Performance Overhead: Interpreted nature can lead to slower execution
compared to compiled languages like C++, which is often a critical factor in
high-frequency trading.
Parallel Computing: Global Interpreter Lock (GIL) can be a bottleneck for
multi-threaded applications, limiting the ability to perform parallel tasks efficiently,
a domain where C++ excels with its concurrency support.
Dynamic Typing: While dynamic typing offers flexibility, it can result in runtime
errors that are caught during compilation in statically-typed languages like C++,
making Python less reliable for systems where correctness is paramount.
Memory Management: Automatic garbage collection can introduce latency that
is unacceptable in low-latency trading systems, whereas C++ allows for more
fine-tuned memory control.
Limitations of Python (in Finance and in general)
Performance Overhead: Interpreted nature can lead to slower execution
compared to compiled languages like C++, which is often a critical factor in
high-frequency trading.
Parallel Computing: Global Interpreter Lock (GIL) can be a bottleneck for
multi-threaded applications, limiting the ability to perform parallel tasks efficiently,
a domain where C++ excels with its concurrency support.
Dynamic Typing: While dynamic typing offers flexibility, it can result in runtime
errors that are caught during compilation in statically-typed languages like C++,
making Python less reliable for systems where correctness is paramount.
Memory Management: Automatic garbage collection can introduce latency that
is unacceptable in low-latency trading systems, whereas C++ allows for more
fine-tuned memory control.
Real-Time Processing: Python may not be well-suited for real-time systems due
to its garbage collection and single-threaded nature, whereas C++ is widely used
in the industry for real-time financial data processing.
Limitations of Python (in Finance and in general)
Performance Overhead: Interpreted nature can lead to slower execution
compared to compiled languages like C++, which is often a critical factor in
high-frequency trading.
Parallel Computing: Global Interpreter Lock (GIL) can be a bottleneck for
multi-threaded applications, limiting the ability to perform parallel tasks efficiently,
a domain where C++ excels with its concurrency support.
Dynamic Typing: While dynamic typing offers flexibility, it can result in runtime
errors that are caught during compilation in statically-typed languages like C++,
making Python less reliable for systems where correctness is paramount.
Memory Management: Automatic garbage collection can introduce latency that
is unacceptable in low-latency trading systems, whereas C++ allows for more
fine-tuned memory control.
Real-Time Processing: Python may not be well-suited for real-time systems due
to its garbage collection and single-threaded nature, whereas C++ is widely used
in the industry for real-time financial data processing.
Ecosystem for Certain Financial Instruments: While Python has a rich set of
Limitations of Python (in Finance and in general)
Performance Overhead: Interpreted nature can lead to slower execution
compared to compiled languages like C++, which is often a critical factor in
high-frequency trading.
Parallel Computing: Global Interpreter Lock (GIL) can be a bottleneck for
multi-threaded applications, limiting the ability to perform parallel tasks efficiently,
a domain where C++ excels with its concurrency support.
Dynamic Typing: While dynamic typing offers flexibility, it can result in runtime
errors that are caught during compilation in statically-typed languages like C++,
making Python less reliable for systems where correctness is paramount.
Memory Management: Automatic garbage collection can introduce latency that
is unacceptable in low-latency trading systems, whereas C++ allows for more
fine-tuned memory control.
Real-Time Processing: Python may not be well-suited for real-time systems due
to its garbage collection and single-threaded nature, whereas C++ is widely used
in the industry for real-time financial data processing.
Ecosystem for Certain Financial Instruments: While Python has a rich set of
Equity: Understanding Shareholder Value
Equity: Understanding Shareholder Value
Definition of Equity:
Equity represents the shareholders’ stake in a company. It is the residual interest
after debts and liabilities have been settled.
In essence, it is the amount of money shareholders would receive if all assets were
liquidated and debts paid off.
Equity: Understanding Shareholder Value
Definition of Equity:
Equity represents the shareholders’ stake in a company. It is the residual interest
after debts and liabilities have been settled.
In essence, it is the amount of money shareholders would receive if all assets were
liquidated and debts paid off.
Influence on Market Value:
The perception of a company’s future performance can heavily influence its stock
price.
Investors are willing to pay more for shares if they believe the company’s equity value
will increase over time.
Equity: Understanding Shareholder Value
Definition of Equity:
Equity represents the shareholders’ stake in a company. It is the residual interest
after debts and liabilities have been settled.
In essence, it is the amount of money shareholders would receive if all assets were
liquidated and debts paid off.
Influence on Market Value:
The perception of a company’s future performance can heavily influence its stock
price.
Investors are willing to pay more for shares if they believe the company’s equity value
will increase over time.
Example:
A tech startup with innovative products may have a high equity valuation due to
growth expectations, despite current profits being low.
Equity: Publicly Traded Companies
Equity: Publicly Traded Companies
Stock Issuance:
Both private and public companies can issue stocks, but public company stocks are
traded on exchanges, making them accessible to the general investing public.
Stocks of public companies (publicly traded companies, or PTCs) are subject to
rigorous legal standards.
Equity: Publicly Traded Companies
Stock Issuance:
Both private and public companies can issue stocks, but public company stocks are
traded on exchanges, making them accessible to the general investing public.
Stocks of public companies (publicly traded companies, or PTCs) are subject to
rigorous legal standards.
Regulatory Compliance:
PTCs are required to maintain transparency by regularly publishing financial reports.
They must also comply with regulations designed to protect the interests of
shareholders and the integrity of the market.
Equity: Publicly Traded Companies
Stock Issuance:
Both private and public companies can issue stocks, but public company stocks are
traded on exchanges, making them accessible to the general investing public.
Stocks of public companies (publicly traded companies, or PTCs) are subject to
rigorous legal standards.
Regulatory Compliance:
PTCs are required to maintain transparency by regularly publishing financial reports.
They must also comply with regulations designed to protect the interests of
shareholders and the integrity of the market.
Example:
A publicly traded retail giant must disclose sales, profits, and strategies in quarterly
reports, impacting its stock valuation.
Stocks: Ownership and Value
Stocks: Ownership and Value
Ownership Representation:
A stock is a representation of ownership in a company, historically tied to the
company’s net realisable asset value.
Ownership implies a share in the company’s residual cash after liquidation of assets
and satisfaction of liabilities.
Stocks: Ownership and Value
Ownership Representation:
A stock is a representation of ownership in a company, historically tied to the
company’s net realisable asset value.
Ownership implies a share in the company’s residual cash after liquidation of assets
and satisfaction of liabilities.
Stocks vs. Equity:
While stocks and equity both signify ownership, ’stock’ typically refers to the
tradable financial instruments representing equity.
Equity is more broadly the value of ownership after debts are accounted for.
Stocks: Ownership and Value
Ownership Representation:
A stock is a representation of ownership in a company, historically tied to the
company’s net realisable asset value.
Ownership implies a share in the company’s residual cash after liquidation of assets
and satisfaction of liabilities.
Stocks vs. Equity:
While stocks and equity both signify ownership, ’stock’ typically refers to the
tradable financial instruments representing equity.
Equity is more broadly the value of ownership after debts are accounted for.
Example:
An investor purchases 100 shares of a manufacturing company, effectively buying a
stake in the company’s assets and future profitability.
Stocks: Financial Health and Investment
Stocks: Financial Health and Investment
Investment Perspective:
From an investment viewpoint, a company is seen as a ’going concern’, implying
that the collective value of its assets often exceeds their individual liquidation values.
Stocks represent a claim on a portion of the firm’s future earnings potential.
Stocks: Financial Health and Investment
Investment Perspective:
From an investment viewpoint, a company is seen as a ’going concern’, implying
that the collective value of its assets often exceeds their individual liquidation values.
Stocks represent a claim on a portion of the firm’s future earnings potential.
Financial Analysis:
Stocks are a critical element on a company’s balance sheet and are widely used by
analysts to gauge financial health.
The performance of stocks in the market reflects investor sentiment about the
company’s current and future performance.
Stocks: Financial Health and Investment
Investment Perspective:
From an investment viewpoint, a company is seen as a ’going concern’, implying
that the collective value of its assets often exceeds their individual liquidation values.
Stocks represent a claim on a portion of the firm’s future earnings potential.
Financial Analysis:
Stocks are a critical element on a company’s balance sheet and are widely used by
analysts to gauge financial health.
The performance of stocks in the market reflects investor sentiment about the
company’s current and future performance.
Example:
An increase in stock price may result when a tech company announces a
breakthrough product, signalling anticipated future revenue growth.
Equity investing
Equity investing involves buying shares in companies with the anticipation of income
from dividends or capital gains upon resale. Equity investors often gain voting rights,
which allows them to vote on the board of directors and influence management
decisions if their stake is significant enough. Below: WIG20 on October 1, 2020.
Equity investing
Equity investing involves buying shares in companies with the anticipation of income
from dividends or capital gains upon resale. Equity investors often gain voting rights,
which allows them to vote on the board of directors and influence management
decisions if their stake is significant enough. Below: WIG20 on October 1, 2020.
WIG20 on October 1, 2020
WIG20 on October 1, 2021
CD-PROJEKT RED (The Witcher, Cyberpunk ’77) on October 1, 2020
CD-PROJEKT RED on October 1, 2021
DAX on October 1, 2020
DAX on October 1, 2021
Markets
country main indices stock exchange regulator
Poland WIG20 GPW KNF
Germany DAX Frankfurt SE FMA, Finanzmarktaufsichtsbehörde
US S&P500, NASDAQ, DowJones N. Y. SE SEC, Securities and Exchanges Commission
UK FTSE London SE FCA, Financial Conduct Authority
Understanding Forward Contracts
Forward Contract Fundamentals:
A contractual agreement to buy or sell an asset at a predetermined price at a
specific time in the future.
Not standardised, hence the terms can be customised to fit the needs of the
contracting parties.
Characteristics of Forward Contracts:
Not traded on exchanges; instead, they are over-the-counter (OTC) instruments.
Counterparty risk is present because there is no clearinghouse as a guarantor.
Sellers and buyers are bound by the contract terms and must fulfil their obligations
at maturity.
Applications of Forward Contracts:
Often used by corporations to hedge against fluctuations in currency exchange
Futures Contracts: Standardised Trading
Futures Contract Overview:
A legal agreement to buy or sell a specific commodity, asset, or security at a set
price at a future date.
Standardised in terms of quality, quantity, and delivery time, traded on regulated
exchanges.
Key Differences from Forwards:
Marked to market daily, with profits and losses realized in real-time.
Require a margin deposit to manage credit risk.
Feature a clearinghouse which guarantees the contract, reducing default risk.
Strategies Involving Futures:
Used for hedging to mitigate the risk of price movements in the underlying asset.
Can be traded for speculative purposes; traders can take positions based on market
expectations.
Unlike forwards, futures can be closed out before expiration to realise profits or
Options, a gentle introduction
Options, a gentle introduction
Options, a gentle introduction
Options are traded both on exchanges and in the OTC markets. There are two
types of option: calls and puts.
