Jarrow Rudd

Jarrow Rudd

The Jarrow–Rudd (1983) (JR) tree is not a risk-neutral tree and, in fact, would appear to be the only non-risk-neutral tree in common use. (JR) constructed a binomial model where the first two moments of a discrete or continuous time log return processes match.

Cython for Python Speeding up Binomial Tree estimation for Jarrow Rudd.

Python code and the Cython compiler allow prototyping in Google Colab, where generation of optimized C code with very minor code modifications can be performed. Below, we extract code from Brian Granger's github and set up in a Google Colab. We compare the estimation speed in Google Colab for pure Python against very similar Cython. This approach permits us to call upon powerful scientific libraries that are open source tools in the Python notebook environment and reveals Cython as having very compelling efficiencies. The results obtained mirror closely those reported in Das and Granger (2010).

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