Homework 4

Pandas and stock price paths

Due September 22nd by 11:59 PM
Submit assignments as last_first_hw4.py

Summary:

In this assignment you will create a python script that reads through a file of stock
data, compute returns, and compare the returns between stocks.

New programming elements introduced in this assignment:

- Working with Pandas to hold data
- Video introduction by Wes McKinney, the original creator of Pandas

Notation for financial mathematics

- Denote the spot price and logarithmic price as 𝑆𝑡 and 𝑋𝑡 = log⁡(𝑆𝑡 ), respectively
▪ Logarithmic return at time 𝑡 is then defined as 𝑟𝑡 = 𝑋𝑡 − 𝑋𝑡−1
- Denote continuous time as 𝑡 ∈ [0, 𝑇]
- Denote the discretization of 𝑇 into a grid of 𝑛 ∈ [0, 𝑁] steps (indexes) as 𝑡𝑛
𝑇
▪ The step size is then Δ𝑡 =
𝑁
▪ The time of the initial observation occurs at 𝑛 = 0, i.e. 𝑡 = 𝑡0.
▪ In our setting, 𝑇 = 23400, 𝑁 = 4680, and Δ𝑡 = 5

Homework Instructions:

Using the two files on canvas: hw4_start.py and hw4_stockClass.py.

1. Read the Feb 1 stock data file located on Canvas (Feb 5 WIP).
2. After reading the data, create a Pandas DataFrame for each stock:
DFname = pd.DataFrame(symDict[“ticker”].Xn,columns=[‘seconds’, ‘S’)

3. For each stock DataFrame, create the following columns (aka pd.Series):
a. Symbol: DFname['symbol'] = 'TSLA'
b. X: DFname[X] = 'TSLA'
c. Returns: DFname['return'] = DFname.X - DFname.X.shift(1)
d. Time: DFname['time'] = pd.to_time(DFname['seconds'],unit='s')
or DFname['time'] = pd.to_time(DFname['seconds'],unit='s').dt.time

4. For each stock, graph the price series:

DFname.plot(x=’time’,y=’S’)

Grading Process

I will award points according the rubric in the syllabus. To determine whether the script
is correct and efficient, the program will be run on a separate stock-day file. The script, if
done correctly, will report accurate results for a random stock day file.
If you are unable to complete all the tasks above, at a minimum make sure your script can
run and produce some output. A script that doesn’t run receives the least amount of points.