Re: [Numpy-discussion] add xirr to numpy financial functions?
On Sun, 24 May 2009 18:14:42 -0400 josef.pktd@gmail.com wrote:
On Sun, May 24, 2009 at 4:33 PM, Joe Harrington <jh@physics.ucf.edu> wrote:
I hate to ask for another function in numpy, but there's an obvious one missing in the financial group: xirr. ?It could be done as a new function or as an extension to the existing np.irr.
The internal rate of return (np.irr) is defined as the growth rate that would give you a zero balance at the end of a period of investment given a series of cash flows into or out of the investment at regular intervals (the first and last cash flows are usually an initial deposit and a withdrawal of the current balance).
This is useful in academics, but if you're tracking a real investment, you don't just withdraw or add money on a perfectly annual basis, nor do you want a calc with thousands of days of zero entries just so you can handle the uneven intervals by evening them out. ?Both excel and openoffice define a "xirr" function that pairs each cash flow with a date. ?Would there be an objection to either a xirr or adding an optional second arg (or a keyword arg) to np.irr in numpy? ?Who writes the code is a different question, but that part isn't hard.
3 comments:
* open office has also the other function in an x??? version, so it might be good to add it consistently to all functions
* date type: scikits.timeseries and the gsoc for implementing a date type would be useful to have a clear date type, or would you want to base it only on python standard library
* real life accuracy: given that there are large differences in the definition of a year for financial calculations, any simple implementation would be only approximately accurate. for example in the open office help, oddlyield list the following option
Basis is chosen from a list of options and indicates how the year is to be calculated. Basis Calculation 0 or missing US method (NASD), 12 months of 30 days each 1 Exact number of days in months, exact number of days in year 2 Exact number of days in month, year has 360 days 3 Exact number of days in month, year has 365 days 4 European method, 12 months of 30 days each
So, my question: what's the purpose of the financial function in numpy? Currently it provides convenient functions for (approximate) interest calculations. If they get expanded to a "serious" implementation of, for example, the main financial functions listed in the open office help (just for reference) then maybe numpy is not the right location for it.
I started to do something similar in matlab, and once I tried to use real dates instead of just counting months, the accounting rules get quickly very messy.
Using dates as you propose would be very convenient, but the users shouldn't be surprised that their actual payments at the end of the year don't fully match up with what numpy told them.
my 3cents
Josef
First point: agreed. I wish this community had a design review process for numpy and scipy, so that these things could get properly hashed out, and not just one person (even Travis) suggesting something and everyone else saying yeah-sure-whatever. Does anyone on the list have the financial background to suggest what functions "should" be included in a basic set of financial routines? xirr is the only one I've ever used in a spreadsheet, myself. Other points: Yuk. You're right. When these first came up for discussion, I had a Han Solo moment ("I've got a baaad feeling about this...") but I couldn't put my finger on why. They seemed like simple and limited functions with high utility. Certainly anything as open-ended as financial-industry rules should go elsewhere (scikits, scipy, monpy, whatever). But, that doesn't prevent a user-supplied, floating-point time array from going into a function in numpy. The rate of return would be in units of that array. Functions that convert date/time in some format (or many) and following some rule (or one of many) to such a floating array can still go elsewhere, maintained by people who know the definitions, if they have interest (pun intended). That would make the functions in numpy much more useful without bloating them or making them a maintenance nightmare. --jh--
On Mon, May 25, 2009 at 11:50 AM, Joe Harrington <jh@physics.ucf.edu> wrote:
On Sun, 24 May 2009 18:14:42 -0400 josef.pktd@gmail.com wrote:
On Sun, May 24, 2009 at 4:33 PM, Joe Harrington <jh@physics.ucf.edu> wrote:
I hate to ask for another function in numpy, but there's an obvious one missing in the financial group: xirr. ?It could be done as a new function or as an extension to the existing np.irr.
The internal rate of return (np.irr) is defined as the growth rate that would give you a zero balance at the end of a period of investment given a series of cash flows into or out of the investment at regular intervals (the first and last cash flows are usually an initial deposit and a withdrawal of the current balance).
This is useful in academics, but if you're tracking a real investment, you don't just withdraw or add money on a perfectly annual basis, nor do you want a calc with thousands of days of zero entries just so you can handle the uneven intervals by evening them out. ?Both excel and openoffice define a "xirr" function that pairs each cash flow with a date. ?Would there be an objection to either a xirr or adding an optional second arg (or a keyword arg) to np.irr in numpy? ?Who writes the code is a different question, but that part isn't hard.
3 comments:
* open office has also the other function in an x??? version, so it might be good to add it consistently to all functions
* date type: scikits.timeseries and the gsoc for implementing a date type would be useful to have a clear date type, or would you want to base it only on python standard library
* real life accuracy: given that there are large differences in the definition of a year for financial calculations, any simple implementation would be only approximately accurate. for example in the open office help, oddlyield list the following option
Basis is chosen from a list of options and indicates how the year is to be calculated. Basis Calculation 0 or missing US method (NASD), 12 months of 30 days each 1 Exact number of days in months, exact number of days in year 2 Exact number of days in month, year has 360 days 3 Exact number of days in month, year has 365 days 4 European method, 12 months of 30 days each
So, my question: what's the purpose of the financial function in numpy? Currently it provides convenient functions for (approximate) interest calculations. If they get expanded to a "serious" implementation of, for example, the main financial functions listed in the open office help (just for reference) then maybe numpy is not the right location for it.
I started to do something similar in matlab, and once I tried to use real dates instead of just counting months, the accounting rules get quickly very messy.
Using dates as you propose would be very convenient, but the users shouldn't be surprised that their actual payments at the end of the year don't fully match up with what numpy told them.
my 3cents
Josef
First point: agreed. I wish this community had a design review process for numpy and scipy, so that these things could get properly hashed out, and not just one person (even Travis) suggesting something and everyone else saying yeah-sure-whatever.
Does anyone on the list have the financial background to suggest what functions "should" be included in a basic set of financial routines? xirr is the only one I've ever used in a spreadsheet, myself.
Again, I think it depends on what exactly you want to do. While I've certainly never worked in a quant shop, I am familiar with some of the academic/CFA-type usages. On my todo list for the summer is to provide some Cookbook examples for some options pricing and yield curve models (some of which will be based on past work), so I might be in a somewhat better position to answer this later. There is always quantlib over here <http://quantlib.org/reference/index.html>, which is certainly a good place to look for what *could* be included... but this is of course much too field-specific to go into Numpy or Scipy.
Other points: Yuk. You're right.
When these first came up for discussion, I had a Han Solo moment ("I've got a baaad feeling about this...") but I couldn't put my finger on why. They seemed like simple and limited functions with high utility. Certainly anything as open-ended as financial-industry rules should go elsewhere (scikits, scipy, monpy, whatever).
But remember. Han shot first ;)
But, that doesn't prevent a user-supplied, floating-point time array from going into a function in numpy. The rate of return would be in units of that array. Functions that convert date/time in some format (or many) and following some rule (or one of many) to such a floating array can still go elsewhere, maintained by people who know the definitions, if they have interest (pun intended). That would make the functions in numpy much more useful without bloating them or making them a maintenance nightmare.
This seems like a good direction, if I understand you correctly. That way the user could just supply a list of trading days or whatever for the instrument they're interested in. Anything else could be maintained elsewhere, and I think this would be an interesting project personally. Cheers, Skipper
On Mon, May 25, 2009 at 11:50 AM, Joe Harrington <jh@physics.ucf.edu> wrote:
On Sun, 24 May 2009 18:14:42 -0400 josef.pktd@gmail.com wrote:
On Sun, May 24, 2009 at 4:33 PM, Joe Harrington <jh@physics.ucf.edu> wrote:
I hate to ask for another function in numpy, but there's an obvious one missing in the financial group: xirr. ?It could be done as a new function or as an extension to the existing np.irr.
The internal rate of return (np.irr) is defined as the growth rate that would give you a zero balance at the end of a period of investment given a series of cash flows into or out of the investment at regular intervals (the first and last cash flows are usually an initial deposit and a withdrawal of the current balance).
This is useful in academics, but if you're tracking a real investment, you don't just withdraw or add money on a perfectly annual basis, nor do you want a calc with thousands of days of zero entries just so you can handle the uneven intervals by evening them out. ?Both excel and openoffice define a "xirr" function that pairs each cash flow with a date. ?Would there be an objection to either a xirr or adding an optional second arg (or a keyword arg) to np.irr in numpy? ?Who writes the code is a different question, but that part isn't hard.
3 comments:
* open office has also the other function in an x??? version, so it might be good to add it consistently to all functions
* date type: scikits.timeseries and the gsoc for implementing a date type would be useful to have a clear date type, or would you want to base it only on python standard library
* real life accuracy: given that there are large differences in the definition of a year for financial calculations, any simple implementation would be only approximately accurate. for example in the open office help, oddlyield list the following option
Basis is chosen from a list of options and indicates how the year is to be calculated. Basis Calculation 0 or missing US method (NASD), 12 months of 30 days each 1 Exact number of days in months, exact number of days in year 2 Exact number of days in month, year has 360 days 3 Exact number of days in month, year has 365 days 4 European method, 12 months of 30 days each
So, my question: what's the purpose of the financial function in numpy? Currently it provides convenient functions for (approximate) interest calculations. If they get expanded to a "serious" implementation of, for example, the main financial functions listed in the open office help (just for reference) then maybe numpy is not the right location for it.
I started to do something similar in matlab, and once I tried to use real dates instead of just counting months, the accounting rules get quickly very messy.
Using dates as you propose would be very convenient, but the users shouldn't be surprised that their actual payments at the end of the year don't fully match up with what numpy told them.
my 3cents
Josef
First point: agreed. I wish this community had a design review process for numpy and scipy, so that these things could get properly hashed out, and not just one person (even Travis) suggesting something and everyone else saying yeah-sure-whatever.
Does anyone on the list have the financial background to suggest what functions "should" be included in a basic set of financial routines? xirr is the only one I've ever used in a spreadsheet, myself.
Other points: Yuk. You're right.
When these first came up for discussion, I had a Han Solo moment ("I've got a baaad feeling about this...") but I couldn't put my finger on why. They seemed like simple and limited functions with high utility. Certainly anything as open-ended as financial-industry rules should go elsewhere (scikits, scipy, monpy, whatever).
But, that doesn't prevent a user-supplied, floating-point time array from going into a function in numpy. The rate of return would be in units of that array. Functions that convert date/time in some format (or many) and following some rule (or one of many) to such a floating array can still go elsewhere, maintained by people who know the definitions, if they have interest (pun intended). That would make the functions in numpy much more useful without bloating them or making them a maintenance nightmare.
If you think of time just as a regularly spaced, e.g. days, but with sparse points on it, or as a continuous variable, then extending the current functions should be relatively easy. I guess the only questions are compounding, annual, quarterly or at each payment, and whether the annual rate is calculated as real compounded annualized rate or as accounting annual rate, e.g. quarterlyrate*4. This leaves "What is the present value, if you get 100 Dollars at the 10th day of each month (or at the next working day if the 10th day is a holiday or a weekend) for the next 5 years and the monthly interest rate is 5/12%?" for another day. Initially I understood you wanted the date as a string or date type as in e.g open office. What would be the units of the user-supplied, floating-point time array? It is still necessary to know the time units to provide an annualized rate, unless the rate is in continuous time, exp(r*t). I don't know whether this would apply to all functions in numpy.finance, it's a while since I looked at the code. Maybe there are some standard simplifications in open office or excel. I briefly skimmed the list of function in the open office help, and it would be useful to have them available, e.g. as a package in scipy. But my google searches in the past for applications in finance with a compatible license didn't provide much useful code that could form the basis of a finance package. Adding more convenience and functionality to numpy.finance is useful, but if they get extended with slow feature creep, then another location (scipy) might be more appropriate and would be more expandable, even if it happens only slowly. That's just my opinion (obviously), I'm a relative newbie to numpy/scipy and still working my way through all the different subpackages. Josef
participants (3)
-
Joe Harrington -
josef.pktd＠gmail.com -
Skipper Seabold