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Advanced Quantitative Finance with C++

Book Description

Create and implement mathematical models in C++ using quantitative finance

In Detail

This book will introduce you to the key mathematical models used to price financial derivatives, as well as the implementation of main numerical models used to solve them. In particular, equity, currency, interest rates, and credit derivatives are discussed. In the first part of the book, the main mathematical models used in the world of financial derivatives are discussed. Next, the numerical methods used to solve the mathematical models are presented. Finally, both the mathematical models and the numerical methods are used to solve some concrete problems in equity, forex, interest rate, and credit derivatives.

The models used include the Black-Scholes and Garman-Kohlhagen models, the LIBOR market model, structural and intensity credit models. The numerical methods described are Monte Carlo simulation (for single and multiple assets), Binomial Trees, and Finite Difference Methods. You will find implementation of concrete problems including European Call, Equity Basket, Currency European Call, FX Barrier Option, Interest Rate Swap, Bankruptcy, and Credit Default Swap in C++.

What You Will Learn

  • Solve complex pricing problems in financial derivatives using a structured approach with the Bento Box template
  • Explore some key numerical methods including binomial trees, finite differences, and Monte Carlo simulation
  • Develop your understanding of equity, forex, interest rate, and credit derivatives through concrete examples
  • Implement simple and complex derivative instruments in C++
  • Discover the most important mathematical models used in quantitative finance today to price derivative instruments
  • Effectively Incorporate object oriented programming (OOP) principles into the code
  • Downloading the example code for this book. You can download the example code files for all Packt books you have purchased from your account at http://www.PacktPub.com. If you purchased this book elsewhere, you can visit http://www.PacktPub.com/support and register to have the files e-mailed directly to you.

    Table of Contents

    1. Advanced Quantitative Finance with C++
      1. Table of Contents
      2. Advanced Quantitative Finance with C++
      3. Credits
      4. About the Author
      5. Acknowledgments
      6. About the Reviewer
      7. www.PacktPub.com
        1. Support files, eBooks, discount offers, and more
          1. Why subscribe?
          2. Free access for Packt account holders
      8. Preface
        1. What this book covers
        2. What you need for this book
        3. Who this book is for
        4. Conventions
        5. Reader feedback
          1. Customer support
          2. Downloading the example code
          3. Errata
          4. Piracy
          5. Questions
      9. 1. What is Quantitative Finance?
        1. Discipline 1 – finance (financial derivatives)
        2. Discipline 2 – mathematics
        3. Discipline 3 – informatics (C++ programming)
        4. The Bento Box template
        5. Summary
      10. 2. Mathematical Models
        1. Equity
        2. Foreign exchange
        3. Interest rates
          1. Short rate models
          2. Market models
        4. Credit
          1. Structural models
          2. Intensity models
        5. Summary
      11. 3. Numerical Methods
        1. The Monte Carlo simulation method
          1. Algorithm of the MC method
          2. Example of the MC method
        2. The Binomial Trees method
          1. Algorithm of the BT method
          2. Example of the BT method
        3. The Finite Difference method
          1. Algorithm of FDM
          2. Example of the FD method
        4. Summary
      12. 4. Equity Derivatives in C++
        1. Basic example – European Call
        2. Advanced example – equity basket
        3. Summary
      13. 5. Foreign Exchange Derivatives with C++
        1. Basic example – European FX Call (FX1)
        2. Advanced example – FX barrier option (FX2)
        3. Summary
      14. 6. Interest Rate Derivatives with C++
        1. Basic example – plain vanilla IRS (IR1)
        2. Advanced example – IRS with Cap (IR2)
        3. Summary
      15. 7. Credit Derivatives with C++
        1. Basic example – bankruptcy (CR1)
        2. Advanced example – CDS (CR2)
        3. Summary
      16. A. C++ Numerical Libraries for Option Pricing
        1. Numerical recipes
        2. Financial numerical recipes
        3. The QuantLib project
        4. The Boost library
        5. The GSL library
      17. B. References
        1. Chapter 2
        2. Chapter 3
        3. Chapter 4
        4. Chapter 5
        5. Chapter 6
        6. Chapter 7
        7. Appendix A
      18. Index