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Refactor selection logic for IRR #121

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merged 4 commits into from
May 7, 2024
+29 −18
Merged

Refactor selection logic for IRR #121

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b765948
ENH: Refactored IRR function to include default selection logic
Eugenia-Mazur Apr 14, 2024
a0564a4
DOC: Documented new parameter for IRR function
Eugenia-Mazur Apr 14, 2024
0488102
MAINT: Fixed E501 Line too long error
Eugenia-Mazur Apr 15, 2024
63aa1b1
MAINT: Fixed "Line too long" error
Eugenia-Mazur Apr 15, 2024
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47 changes: 29 additions & 18 deletions numpy_financial/_financial.py
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Original file line number Diff line number Diff line change
Expand Up @@ -709,7 +709,27 @@ def rate(
return rn


def irr(values, *, raise_exceptions=False):
# default selection logic for IRR function when there are > 2 real solutions
def _irr_default_selection(eirr):
# check sign of all IRR solutions
Comment on lines +712 to +714
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@Kai-Striega Kai-Striega Apr 16, 2024 •
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Suggested change
# default selection logic for IRR function when there are > 2 real solutions
def _irr_default_selection(eirr):
# check sign of all IRR solutions
def _irr_default_selection(eirr):
"""Default selection logic for IRR function when there is > 1 real solution"""
# check sign of all IRR solutions

Python treats triple quoted strings directly following a function/method/class definition as docstrings. These are special comments that are used to document the function/method/class.

It dosen't matter for this function (as it's private), but, for public functions/methods/classes, please follow the numpydoc style guide.

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Also you currently have > 2 real solutions, this should be > 1 real solutions

same_sign = np.all(eirr > 0) if eirr[0] > 0 else np.all(eirr < 0)

# if the signs of IRR solutions are not the same, first filter potential IRR
# by comparing the total positive and negative cash flows.
if not same_sign:
pos = sum(eirr[eirr > 0])
neg = sum(eirr[eirr < 0])
if pos >= neg:
eirr = eirr[eirr >= 0]
else:
eirr = eirr[eirr < 0]

# pick the smallest one in magnitude and return
abs_eirr = np.abs(eirr)
return eirr[np.argmin(abs_eirr)]


def irr(values, *, raise_exceptions=False, selection_logic=_irr_default_selection):
r"""Return the Internal Rate of Return (IRR).

This is the "average" periodically compounded rate of return
Expand All @@ -731,6 +751,12 @@ def irr(values, *, raise_exceptions=False):
having reached the maximum number of iterations (IterationsExceededException).
Set to False as default, thus returning NaNs in the two previous
cases.
selection_logic: function, optional
Function for selection logic when more than 1 real solutions is found.
User may insert their own customised function for selection
of IRR values.The function should accept a one-dimensional array
of numbers and return a number.


Returns
-------
Expand Down Expand Up @@ -824,23 +850,8 @@ def irr(values, *, raise_exceptions=False):
if len(eirr) == 1:
return eirr[0]

# below is for the situation when there are more than 2 real solutions.
# check sign of all IRR solutions
same_sign = np.all(eirr > 0) if eirr[0] > 0 else np.all(eirr < 0)

# if the signs of IRR solutions are not the same, first filter potential IRR
# by comparing the total positive and negative cash flows.
if not same_sign:
pos = sum(values[values>0])
neg = sum(values[values<0])
if pos >= neg:
eirr = eirr[eirr>=0]
else:
eirr = eirr[eirr<0]

# pick the smallest one in magnitude and return
abs_eirr = np.abs(eirr)
return eirr[np.argmin(abs_eirr)]
eirr = selection_logic(eirr)
return eirr


def npv(rate, values):
Expand Down
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