Bayesian Method - Interest Rates.py

#Bayesian Method - measuring conditional probability of increases or decreases in Interest Rates.
#Using the interest rate Δ (Delta)
#IMPORTANT: the following code is measuring the probability of an INCREASE in interest rates based on past data obv 

#any classmates who I have reffered here will enjoy this one, all you have to do is paste 'yourdata' into 'yourdata' and run :) If you wanna give me creds that would be cool lol. 

import pandas as pd

def calculate_probability_increase_interest_rates(data):
    # YOUR CSV MUST HAVE THESE COLUMNS--> 'Interest Rate' and 'Date' 
    data['Interest Rate Delta'] = data['Interest Rate'].diff()
    data['Interest Rate Delta'] = data['Interest Rate Delta'].shift(-1)
    
    #intial (prior) probability
    prior_probability_increase = len(data[data['Interest Rate Delta'] > 0]) / len(data)
    
    #conditional probability
    probability_increase_given_increase = len(data[(data['Interest Rate Delta'] > 0) & (data['Interest Rate Delta'].shift(1) > 0)]) / len(data[(data['Interest Rate Delta'] > 0)])
    
    #probability of an increase or decrease 
    probability_increase = (prior_probability_increase * probability_increase_given_increase) / (prior_probability_increase * probability_increase_given_increase + (1 - prior_probability_increase) * (1 - probability_increase_given_increase))
    
    return probability_increase

data = pd.read_csv('yourdata.csv')
probability_increase_interest_rates = calculate_probability_increase_interest_rates(data)
print('Probability of an increase in interest rates:', probability_increase_interest_rates)