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Mastering Python for Finance

You're reading from   Mastering Python for Finance Understand, design, and implement state-of-the-art mathematical and statistical applications used in finance with Python

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Product type Paperback
Published in Apr 2015
Publisher Packt
ISBN-13 9781784394516
Length 340 pages
Edition 1st Edition
Languages
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Toc

Table of Contents (17) Chapters Close

Mastering Python for Finance
Credits
About the Author
About the Reviewers
www.PacktPub.com
Preface
1. Python for Financial Applications FREE CHAPTER 2. The Importance of Linearity in Finance 3. Nonlinearity in Finance 4. Numerical Procedures 5. Interest Rates and Derivatives 6. Interactive Financial Analytics with Python and VSTOXX 7. Big Data with Python 8. Algorithmic Trading 9. Backtesting 10. Excel with Python Index

The secant method


The secant method uses secant lines to find the root. A secant line is a straight line that intersects two points of a curve. In the secant method, a line is drawn between two points on the continuous function such that it extends and intersects the axis. This method can be thought of as a Quasi-Newton method. By successively drawing such secant lines, the root of the function can be approximated.

The secant method is graphically represented in the following screenshot. An initial guess of the two axis values and is required to find and . A secant line y is drawn from to and intersects at point on the axis such that:

The solution to is therefore:

On the next iteration, and will take on the values of and respectively. The method repeats itself, drawing secant lines for the axis values of and , and , and , and so on. The solution terminates when the maximum number of iterations has been reached or the difference between and has reached a prespecified tolerance...

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