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Summary
Summary
One of the best languages for the development of financial engineering and instrument pricing applications is C++. This book has several features that allow developers to write robust, flexible and extensible software systems. The book is an ANSI/ISO standard, fully object-oriented and interfaces with many third-party applications. It has support for templates and generic programming, massive reusability using templates (?write once?) and support for legacy C applications.
In this book, author Daniel J. Duffy brings C++ to the next level by applying it to the design and implementation of classes, libraries and applications for option and derivative pricing models. He employs modern software engineering techniques to produce industrial-strength applications:
Using the Standard Template Library (STL) in finance Creating your own template classes and functions Reusable data structures for vectors, matrices and tensors Classes for numerical analysis (numerical linear algebra ?) Solving the Black Scholes equations, exact and approximate solutions Implementing the Finite Difference Method in C++ Integration with the ?Gang of Four? Design Patterns Interfacing with Excel (output and Add-Ins) Financial engineering and XML Cash flow and yield curvesIncluded with the book is a CD containing the source code in the Datasim Financial Toolkit. You can use this to get up to speed with your C++ applications by reusing existing classes and libraries.
'Unique... Let's all give a warm welcome to modern pricing tools.'
-- Paul Wilmott, mathematician, author and fund manager
Author Notes
Daniel Duffy works for Datasim, an Amsterdam-based trainer and software developer (www.datasim-component.com, www.datasim.nl). He has been working in IT since 1979 and with object-oriented technology since 1987. He received his MSc and PhD theses (in numerical analysis) from Trinity College, Dublin. His current interests are in the modelling of financial instruments using numerical methods (for example, finite difference method) and C++. He can be contacted at dduffy@datasim.nl
Table of Contents
| 1 Executive Overview of this Book |
| 1.1 What is this book? |
| 1.2 What's special about this book? |
| 1.3 Who is this book for? |
| 1.4 Software requirements |
| 1.5 The structure of this book |
| 1.6 Pedagogical approach |
| 1.7 What this book is not |
| 1.8 Source code on the CD |
| Part 1 Template Programming in C++ |
| 2 A Gentle Introduction to Templates in C++ |
| 2.1 Introduction and objectives |
| 2.2 Motivation and background |
| 2.3 Defining a template |
| 2.3.1 An example |
| 2.4 Template instantiation |
| 2.5 Function templates |
| 2.5.1 An example |
| 2.6 Default values and typedefs |
| 2.7 Guidelines when implementing templates |
| 2.8 Conclusions and summary |
| 3 An Introduction to the Standard Template Library |
| 3.1 Introduction and objectives |
| 3.1.1 Why use STL? |
| 3.2 A Bird's-eye view of STL |
| 3.3 Sequence containers |
| 3.3.1 Programming lists |
| 3.3.2 Vectors and arrays in STL |
| 3.4 Associative containers |
| 3.4.1 Sets in STL |
| 3.4.2 Maps in STL |
| 3.5 Iterators in STL |
| 3.5.1 What kinds of iterators? |
| 3.6 Algorithms |
| 3.7 Using STL for financial instruments |
| 3.8 Conclusions and summary |
| 4 STL for Financial Engineering Applications |
| 4.1 Introduction and objectives |
| 4.2 Clever data structures |
| 4.2.1 A simple output mechanism |
| 4.3 Set theory and STL |
| 4.4 Useful algorithms |
| 4.5 STL adaptor containers |
| 4.6 Conclusions and summary |
| 5 The Property Pattern in Financial Engineering |
| 5.1 Introduction and objectives |
| 5.2 The Property pattern |
| 5.2.1 Requirements for a Property pattern |
| 5.3 An example |
| 5.4 Extending the Property pattern: property sets and property lists |
| 5.4.1 An example |
| 5.5 Properties and exotic options |
| 5.5.1 Example: Executive options |
| 5.6 Conclusions and summary |
| Part 2 Building Block Classes |
| 6 Arrays, Vectors and Matrices |
| 6.1 Introduction and objectives |
| 6.2 Motivation and background |
| 6.3 A layered approach |
| 6.4 The Array and Matrix classes in detail |
| 6.4.1 Simple print functions |
| 6.4.2 Array example |
| 6.4.3 Matrix example |
| 6.5 The Vector and NumericMatrix classes in detail |
| 6.5.1 Vector example |
| 6.5.2 NumericMatrix example |
| 6.6 Associative arrays and matrices |
| 6.7 Conclusions and summary |
| 7 Arrays and Matrix Properties |
| 7.1 Introduction and objectives |
| 7.2 An overview of the functionality |
| 7.3 Software requirements |
| 7.3.1 Accuracy |
| 7.3.2 Efficiency |
| 7.3.3 Reliability |
| 7.3.4 Understandability |
| 7.4 The core processes |
| 7.4.1 Interactions between matrices and vectors |
| 7.4.2 Some examples |
| 7.5 Other function categories |
| 7.5.1 Measures of central tendency |
| 7.5.2 Measures of dispersion |
| 7.5.3 Moments, skewness, kurtosis |
| 7.5.4 Inequalities |
| 7.6 Using the functions |
| 7.6.1 Calculating historical volatility |
| 7.6.2 Variance of return of a portfolio |
| 7.7 An introduction to exception handling |
| 7.7.1 Try, throw and catch: A bit like tennis |
| 7.8 Conclusions and summary |
| 8 Numerical Linear Algebra |
| 8.1 Introduction and objectives |
| 8.2 An introduction to numerical linear algebra |
| 8.2.1 Direct methods |
| 8.2.2 Iterative methods |
| 8.3 Tridiagonal systems |
| 8.3.1 LU decomposition |
| 8.3.2 Godunov's Double Sweep method |
| 8.3.3 Designing and implementing tridiagonal schemes |
| 8.4 Block tridiagonal systems |
| 8.5 What requirem |
