Python has taken the financial programming world by storm, and demand for finance experts who can use it is soaring. Here, a Toptal finance professional and Python expert shows beginners how to build a loan payment cash flow model with Python.
Many financial experts are adept at using Excel to build financial models. However, because of difficulties with peer review, version control, and the inability to form recursive functions, Excel may not be the best choice for more sophisticated models. Despite these drawbacks, many financial professionals still use Excel because they are less confident with programming languages such as Python.
Python is one of the easiest programming languages to learn. Because it was designed with readability and ease of use in mind, its code is concise and close to plain English. In this article, I show how easy it is to build a Python cash flow model for loan payments by using the most basic functions, packages, and data structures.
To follow along, you will need to use Colaboratory (“Colab” for short), Google’s free web-based notebook application that lets you write and execute code. Colab is a Python interpreter that uses cells that can contain code, Markdown (for easily styled text), images, or other data. Colab continuously stores the values of your code as you write, making it quick and simple to catch mistakes or bugs as they appear. (If you don’t want to jump in just yet, follow along with this example Colab notebook.)
First, Make Sure You Have the Tools You Need
We will be building a model for an amortized loan that has a scheduled, periodic payment applied to both the loan’s principal and the interest.
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