Python Programming for Economics and Finance

Numba

Thomas J. Sargent & John Stachurski

Numba

Numba¶

In addition to what’s in Anaconda, this lecture will need the following libraries:

!pip install quantecon

Please also make sure that you have the latest version of Anaconda, since old versions are a common source of errors.

Let’s start with some imports:

import numpy as np
import quantecon as qe
import matplotlib.pyplot as plt

Overview¶

In an earlier lecture we discussed vectorization, which can improve execution speed by sending array processing operations in batch to efficient low-level code.

However, as discussed in that lecture, traditional vectorization schemes have weaknesses:

Highly memory-intensive for compound array operations
Ineffective or impossible for some algorithms

One way to circumvent these problems is by using Numba, a just in time (JIT) compiler for Python.

Numba compiles functions to native machine code instructions at runtime.

When it succeeds, the result is performance comparable to compiled C or Fortran.

In addition, Numba can do useful tricks such as multithreading.

This lecture introduces the core ideas.

Compiling Functions ¶

An Example¶

Let’s consider a problem that’s difficult to vectorize (i.e., hand off to array processing operations).

The problem involves generating the trajectory via the quadratic map

x_{t+1} = \alpha x_t (1 - x_t)

(1)

In what follows we set $\alpha = 4$ .

Base Version¶

Here’s the plot of a typical trajectory, starting from $x_0 = 0.1$ , with $t$ on the x-axis

def qm(x0, n, α=4.0):
    x = np.empty(n+1)
    x[0] = x0
    for t in range(n):
      x[t+1] = α * x[t] * (1 - x[t])
    return x

x = qm(0.1, 250)
fig, ax = plt.subplots()
ax.plot(x, 'b-', lw=2, alpha=0.8)
ax.set_xlabel('$t$', fontsize=12)
ax.set_ylabel('$x_{t}$', fontsize = 12)
plt.show()

Let’s see how long this takes to run for large $n$

n = 10_000_000

with qe.Timer() as timer1:
    # Time Python base version
    x = qm(0.1, n)

Acceleration via Numba¶

To speed the function qm up using Numba, we first import the jit function

from numba import jit

Now we apply it to qm, producing a new function:

qm_numba = jit(qm)

The function qm_numba is a version of qm that is “targeted” for JIT-compilation.

We will explain what this means momentarily.

Let’s time this new version:

with qe.Timer() as timer2:
    # Time jitted version
    x = qm_numba(0.1, n)

This is a large speed gain.

In fact, the next time and all subsequent times it runs even faster as the function has been compiled and is in memory:

with qe.Timer() as timer3:
    # Second run
    x = qm_numba(0.1, n)

Here’s the speed gain

timer1.elapsed /  timer3.elapsed

This is a big boost for a small modification to our original code.

Let’s discuss how this works.

How and When it Works¶

Numba attempts to generate fast machine code using the infrastructure provided by the LLVM Project.

It does this by inferring type information on the fly.

(See our earlier lecture on scientific computing for a discussion of types.)

The basic idea is this:

Python is very flexible and hence we could call the function qm with many types.
- e.g., x0 could be a NumPy array or a list, n could be an integer or a float, etc.
This makes it very difficult to generate efficient machine code ahead of time (i.e., before runtime).
However, when we do actually call the function, say by running qm(0.5, 10), the types of x0, α and n are determined.
Moreover, the types of other variables in qm can be inferred once the input types are known.
So the strategy of Numba and other JIT compilers is to wait until the function is called, and then compile.

That is called “just-in-time” compilation.

Note that, if you make the call qm_numba(0.5, 10) and then follow it with qm_numba(0.9, 20), compilation only takes place on the first call.

This is because compiled code is cached and reused as required.

This is why, in the code above, the second run of qm_numba is faster.

Sharp Bits¶

Numba is relatively easy to use but not always seamless.

Let’s review some of the issues users run into.

Typing¶

Successful type inference is the key to JIT compilation.

In an ideal setting, Numba can infer all necessary type information.

When Numba cannot infer all type information, it will raise an error.

For example, in the setting below, Numba is unable to determine the type of the function g when compiling iterate

@jit
def iterate(f, x0, n):
    x = x0
    for t in range(n):
        x = f(x)
    return x

# Not jitted
def g(x):
    return np.cos(x) - 2 * np.sin(x)

# This code throws an error
try:
    iterate(g, 0.5, 100)
except Exception as e:
    print(e)

In the present case, we can fix this easily by compiling g.

@jit
def g(x):
    return np.cos(x) - 2 * np.sin(x)

iterate(g, 0.5, 100)

In other cases, such as when we want to use functions from external libaries such as SciPy, there might not be any easy workaround.

Global Variables¶

Another thing to be careful about when using Numba is handling of global variables.

For example, consider the following code

a = 1

@jit
def add_a(x):
    return a + x

print(add_a(10))

a = 2

print(add_a(10))

Notice that changing the global had no effect on the value returned by the function 😱.

When Numba compiles machine code for functions, it treats global variables as constants to ensure type stability.

To avoid this, pass values as function arguments rather than relying on globals.

Multithreaded Loops in Numba¶

In addition to JIT compilation, Numba provides support for parallel computing on CPUs and GPUs.

The key tool for parallelization on CPUs in Numba is the prange function, which tells Numba to execute loop iterations in parallel across available cores.

To illustrate, let’s look first at a simple, single-threaded (i.e., non-parallelized) piece of code.

The code simulates updating the wealth $w_t$ of a household via the rule

w_{t+1} = R_{t+1} s w_t + y_{t+1}

(2)

Here

$R$ is the gross rate of return on assets
$s$ is the savings rate of the household and
$y$ is labor income.

We model both $R$ and $y$ as independent draws from a lognormal distribution.

Here’s the code:

@jit
def update(w, r=0.1, s=0.3, v1=0.1, v2=1.0):
    " Updates household wealth. "
    # Draw shocks
    R = np.exp(v1 * np.random.randn()) * (1 + r)
    y = np.exp(v2 * np.random.randn())
    # Update wealth
    w = R * s * w + y
    return w

Let’s have a look at how wealth evolves under this rule.

fig, ax = plt.subplots()

T = 100
w = np.empty(T)
w[0] = 5
for t in range(T-1):
    w[t+1] = update(w[t])

ax.plot(w)
ax.set_xlabel('$t$', fontsize=12)
ax.set_ylabel('$w_{t}$', fontsize=12)
plt.show()

Now let’s suppose that we have a large population of households and we want to know what median wealth will be.

This is not easy to solve with pencil and paper, so we will use simulation instead:

Simulate a large number of households forward in time
Calculate median wealth

Here’s the code:

@jit
def compute_long_run_median(w0=1, T=1000, num_reps=50_000):
    obs = np.empty(num_reps)
    # For each household
    for i in range(num_reps):
        # Set the initial condition and run forward in time
        w = w0
        for t in range(T):
            w = update(w)
        # Record the final value
        obs[i] = w
    # Take the median of all final values
    return np.median(obs)

Let’s see how fast this runs:

with qe.Timer():
    # Warm up
    compute_long_run_median()

with qe.Timer():
    # Second run
    compute_long_run_median()

To speed this up, we’re going to parallelize it via multithreading.

To do so, we add the parallel=True flag and change range to prange:

from numba import prange

@jit(parallel=True)
def compute_long_run_median_parallel(
        w0=1, T=1000, num_reps=50_000
    ):
    obs = np.empty(num_reps)
    for i in prange(num_reps):  # Parallelize over households
        w = w0
        for t in range(T):
            w = update(w)
        obs[i] = w
    return np.median(obs)

Let’s look at the timing:

with qe.Timer():
    # Warm up
    compute_long_run_median_parallel()

with qe.Timer():
    # Second run
    compute_long_run_median_parallel()

The speed-up is significant.

Notice that we parallelize across households rather than over time -- updates of an individual household across time periods are inherently sequential.

For GPU-based parallelization, see our lectures on JAX.

Exercises¶

Exercise 1 and Exercise 3 both estimate $\pi$ by Monte Carlo from random samples in the unit square.

We generate them here and store them in u_draws and v_draws so that we can use them in both exercises and compare results.

n = 1_000_000
rng = np.random.default_rng()
u_draws = rng.uniform(size=n)
v_draws = rng.uniform(size=n)

Solution to Exercise 1

Here is one solution:

@jit
def calculate_pi(u_draws, v_draws):
    n = len(u_draws)
    count = 0
    for i in range(n):
        u, v = u_draws[i], v_draws[i]
        d = np.sqrt((u - 0.5)**2 + (v - 0.5)**2)
        if d < 0.5:
            count += 1

    area_estimate = count / n
    return area_estimate * 4  # dividing by radius**2

Now let’s see how fast it runs:

with qe.Timer():
    calculate_pi(u_draws, v_draws)

with qe.Timer():
    calculate_pi(u_draws, v_draws)

If we switch off JIT compilation by removing @jit, the code takes considerably longer on our machine.

So we get a large speed gain by adding four characters.

The solution above takes one of two natural approaches: it draws all the random points first, stores them in u_draws and v_draws, and then lets the jitted function loop over them.

The other approach is to draw each point inside the loop.

To do this with a NumPy Generator, we pass rng in as an argument and call rng.uniform() inside the loop body

@jit
def calculate_pi_in_loop(rng, n):
    count = 0
    for i in range(n):
        u, v = rng.uniform(), rng.uniform()
        d = np.sqrt((u - 0.5)**2 + (v - 0.5)**2)
        if d < 0.5:
            count += 1
    return (count / n) * 4

with qe.Timer():
    calculate_pi_in_loop(rng, n)

with qe.Timer():
    calculate_pi_in_loop(rng, n)

The two cells timing the first approach measure only the loop --- its random points are drawn once in the shared setup block above and are never timed, while the second approach pays for its draws inside the timed function.

To compare the two approaches fairly, we time the first approach end-to-end, including the cost of generating the arrays:

with qe.Timer():
    u2 = rng.uniform(size=n)
    v2 = rng.uniform(size=n)
    calculate_pi(u2, v2)

In this serial setting the two approaches give equally good estimates and run at similar speed, but they are not equivalent in memory use.

The first approach must hold all $2n$ draws in memory at once --- two arrays of n floating point numbers, or about 16n bytes (around 1.6 GB when n = 100_000_000).

The second draws each point on demand and discards it, so its memory footprint does not grow with n.

This might suggest that drawing inside the loop is the better default.

But as we will see in Exercise 4, drawing inside the loop interacts badly with parallelization.

Exercise 2

In the Introduction to Quantitative Economics with Python lecture series you can learn all about finite-state Markov chains.

For now, let’s just concentrate on simulating a very simple example of such a chain.

Suppose that the volatility of returns on an asset can be in one of two regimes --- high or low.

The transition probabilities across states are as follows

For example, let the period length be one day, and suppose the current state is high.

We see from the graph that the state tomorrow will be

high with probability 0.8
low with probability 0.2

Your task is to simulate a sequence of daily volatility states according to this rule.

Set the length of the sequence to n = 1_000_000 and start in the high state.

Implement a pure Python version and a Numba version, and compare speeds.

To test your code, evaluate the fraction of time that the chain spends in the low state.

If your code is correct, it should be about 2/3.

Hint

Represent the low state as 0 and the high state as 1.
If you want to store integers in a NumPy array and then apply JIT compilation, use x = np.empty(n, dtype=np.int64).

Solution to Exercise 2

We let

0 represent “low”
1 represent “high”

p, q = 0.1, 0.2  # Prob of leaving low and high state respectively

Here’s a pure Python version of the function

n = 1_000_000
rng = np.random.default_rng()
U = rng.uniform(0, 1, size=n)

def compute_series(n, U):
    x = np.empty(n, dtype=np.int64)
    x[0] = 1  # Start in state 1
    for t in range(1, n):
        current_x = x[t-1]
        if current_x == 0:
            x[t] = U[t] < p
        else:
            x[t] = U[t] > q
    return x

Let’s run this code and check that the fraction of time spent in the low state is about 0.666

x = compute_series(n, U)
print(np.mean(x == 0))  # Fraction of time x is in state 0

This is (approximately) the right output.

Now let’s time it:

with qe.Timer():
    compute_series(n, U)

Next let’s implement a Numba version, which is easy

compute_series_numba = jit(compute_series)

Let’s check we still get the right numbers

x = compute_series_numba(n, U)
print(np.mean(x == 0))

Let’s see the time

with qe.Timer():
    compute_series_numba(n, U)

This is a nice speed improvement for one line of code!

Solution to Exercise 3

Here is one solution:

@jit(parallel=True)
def calculate_pi_parallel(u_draws, v_draws):
    n = len(u_draws)
    count = 0
    for i in prange(n):
        u, v = u_draws[i], v_draws[i]
        d = np.sqrt((u - 0.5)**2 + (v - 0.5)**2)
        if d < 0.5:
            count += 1

    area_estimate = count / n
    return area_estimate * 4  # dividing by radius**2

Parallelization pays off when each thread has enough work to overcome the overhead costs while breaking the problem into parts for work to happen simultaneously.

Let’s draw a fresh, much larger set of points rather than reusing the arrays from above.

n = 100_000_000
rng = np.random.default_rng()
u_big = rng.uniform(size=n)
v_big = rng.uniform(size=n)

Now let’s see how fast it runs (the second call measures runtime without compilation time):

with qe.Timer():
    calculate_pi_parallel(u_big, v_big)

with qe.Timer():
    calculate_pi_parallel(u_big, v_big)

For comparison, here is the serial jitted version from Exercise 1 on the same points:

with qe.Timer():
    calculate_pi(u_big, v_big)

Comparing the last two timings, multithreading provides a substantial speed gain on top of JIT compilation.

(If you are executing locally, you will get different results, depending mainly on the number of CPUs on your machine — and at small sample sizes the parallel version can even be slower, because the gains cannot cover the cost of distributing work across threads.)

These two arrays are large and we are finished with them, so we release the memory before moving on.

del u_big, v_big

Notice that we drew all of the random points before the loop and passed them in as arrays, so the parallel loop only reads from memory.

Drawing the points inside the parallel loop instead is surprisingly delicate.

We investigate why, and how to do it safely, in Exercise 4.

Solution to Exercise 4

Here is the tempting version.

We pass rng in as an argument and call it inside the prange loop.

n = 1_000_000
rng = np.random.default_rng()

@jit(parallel=True)
def calculate_pi_in_loop_parallel(rng, n):
    count = 0
    for i in prange(n):
        u, v = rng.uniform(), rng.uniform()
        d = np.sqrt((u - 0.5)**2 + (v - 0.5)**2)
        if d < 0.5:
            count += 1
    return (count / n) * 4

calculate_pi_in_loop_parallel(rng, n)

The code runs without error and returns something close to $\pi$ .

But something is silently wrong with the results.

Here, every thread draws from the same generator rng.

A generator produces each number by updating an internal state.

Under prange, many threads read and update that single state at once, with no coordination between them.

This is a data race.

It creates correlations across the draws and can even cause some draws to be duplicated in an unpredictable way.

Two symptoms reveal the problem.

Symptom 1: the result is no longer reproducible.

A correct generator returns the same answer whenever it is given the same seed.

Because of the data race, the order in which threads happen to touch the shared state affects the stream of draws, so the answer is not reproducible even when the seed is fixed.

for seed in (1, 1, 1):
    print(calculate_pi_in_loop_parallel(np.random.default_rng(seed), n))

Each call uses the same seed, yet the answers differ.

Symptom 2: the estimator is far noisier than it should be.

The duplicated and correlated draws carry less information than $n$ independent draws, so the effective sample size is much smaller than $n$ .

The fix is to give each thread its own random state, which NumPy’s legacy functions such as np.random.uniform() do automatically under Numba.

@jit(parallel=True)
def calculate_pi_legacy(n):
    count = 0
    for i in prange(n):
        u, v = np.random.uniform(0, 1), np.random.uniform(0, 1)
        d = np.sqrt((u - 0.5)**2 + (v - 0.5)**2)
        if d < 0.5:
            count += 1
    return (count / n) * 4

To see the cost of the race, we repeat each estimate many times and plot its spread against the correct version as the sample size grows.

sample_sizes = np.logspace(3, 6, 10).astype(int)
num_reps = 20

methods = [("per-thread state (correct)",
            lambda n: calculate_pi_legacy(n), 'C0'),
           ("shared generator in prange (data race)",
            lambda n: calculate_pi_in_loop_parallel(np.random.default_rng(), n), 'C1')]

fig, ax = plt.subplots()
for label, estimate, color in methods:
    draws = np.array([[estimate(int(m)) for _ in range(num_reps)]
                      for m in sample_sizes])
    means, stds = draws.mean(axis=1), draws.std(axis=1)
    ax.plot(sample_sizes, means, color=color, marker='o', ms=3, label=label)
    ax.fill_between(sample_sizes, means - 2 * stds, means + 2 * stds,
                    color=color, alpha=0.2)
ax.axhline(np.pi, color='k', lw=0.8, ls='--', label=r'$\pi$')
ax.set_xscale('log')
ax.set_xlabel('number of samples')
ax.set_ylabel(r'estimate of $\pi$')
ax.legend()
plt.show()

Both bands are centered on $\pi$ , but the band associated with the data race is wider than the other one and narrows slowly as the sample size grows.

The other safe option is the one from Exercise 3: draw the points before the loop so that the parallel loop only reads from memory.

Solution to Exercise 5

We time each approach from start to finish, so the pre-draw version pays for building its arrays.

n = 100_000_000
rng = np.random.default_rng()

with qe.Timer():
    u_draws = rng.uniform(size=n)
    v_draws = rng.uniform(size=n)
    calculate_pi_parallel(u_draws, v_draws)

with qe.Timer():
    calculate_pi_legacy(n)

Drawing inside the loop is much faster.

The pre-draw version generates its two arrays on a single thread before the loop begins.

The in-loop version spreads the random number generation across all threads instead.

It also avoids allocating two arrays of n numbers, so it saves both time and memory.

Exercise 6

In our lecture on SciPy, we discussed pricing a call option in a setting where the underlying stock price had a simple and well-known distribution.

Here we discuss a more realistic setting.

We recall that the price of the option obeys

P = \beta^n \mathbb E \max\{ S_n - K, 0 \}

(3)

where

$\beta$ is a discount factor,
$n$ is the expiry date,
$K$ is the strike price and
$\{S_t\}$ is the price of the underlying asset at each time $t$ .

Suppose that n, β, K = 20, 0.99, 100.

Assume that the stock price obeys

\ln \frac{S_{t+1}}{S_t} = \mu + \sigma_t \xi_{t+1}

(4)

where

\sigma_t = \exp(h_t), \quad h_{t+1} = \rho h_t + \nu \eta_{t+1}

(5)

Here $\{\xi_t\}$ and $\{\eta_t\}$ are IID and standard normal.

(This is a stochastic volatility model, where the volatility $\sigma_t$ varies over time.)

Use the defaults μ, ρ, ν, S0, h0 = 0.0001, 0.1, 0.001, 10, 0.

(Here S0 is $S_0$ and h0 is $h_0$ .)

By generating $M$ paths $s_0, \ldots, s_n$ , compute the Monte Carlo estimate

\hat P_M := \beta^n \mathbb E \max\{ S_n - K, 0 \} \approx \frac{1}{M} \sum_{m=1}^M \max \{S_n^m - K, 0 \}

(6)

of the price, applying Numba and parallelization.

Solution to Exercise 6

With $s_t := \ln S_t$ , the price dynamics become

s_{t+1} = s_t + \mu + \exp(h_t) \xi_{t+1}

(7)

Using this fact, the solution can be written as follows.

M = 10_000_000

n, β, K = 20, 0.99, 100
μ, ρ, ν, S0, h0 = 0.0001, 0.1, 0.001, 10, 0

@jit(parallel=True)
def compute_call_price_parallel(β=β,
                                μ=μ,
                                S0=S0,
                                h0=h0,
                                K=K,
                                n=n,
                                ρ=ρ,
                                ν=ν,
                                M=M):
    current_sum = 0.0
    # For each sample path
    for m in prange(M):
        s = np.log(S0)
        h = h0
        # Simulate forward in time
        for t in range(n):
            s = s + μ + np.exp(h) * np.random.randn()
            h = ρ * h + ν * np.random.randn()
        # And add the value max{S_n - K, 0} to current_sum
        current_sum += max(np.exp(s) - K, 0)

    return β**n * current_sum / M

Try swapping between parallel=True and parallel=False and noting the run time.

If you are on a machine with many CPUs, the difference should be significant.