SURVEYS AND CROSSOVERS: Implementing Option Pricing Models Using Python and Cython
Sanjiv R. Das and Brian Granger
Volume 8, Number 4, Fourth Quarter 2010
In this article we propose a new approach for implementing option pricing models in finance. Financial engineers typically prototype such models in an interactive language (such as Matlab) and then use a compiled language such as C/C++ for production systems. Code is therefore written twice. In this article we show that the Python programming language and the Cython compiler allows prototyping in a Matlab-like manner, followed by direct generation of optimized C code with very minor code modifications. The approach is able to call upon powerful scientific libraries, uses only open source tools, and is free of any licensing costs. We provide examples where Cython speeds up a prototype version by over 500 times. These performance gains in conjunction with vast savings in programmer time make the approach very promising.