Advanced Quantitative Finance with C++

by Alonso Peña

Create and implement mathematical models in C++ using Quantitative Finance If you are a quantitative analyst, risk manager, actuary, or a professional working in the field of quantitative finance and want a quick hands-on introduction to the pricing of financial derivatives, this book is ideal for you. You should be familiar with the basic programming concepts and C++ programming language. You should also be acquainted with calculus of undergraduate level. 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++.

Genres: Finance

124 pages, Paperback

First published May 18, 2014

Reviews

[Daniel Chan · Rating 5 out of 5]

Just wanted to be clear before reading this book, you definitely need to be somewhat familiar with the subject (hence Advanced Quantitative Finance) already before getting this book to understand, Although you do not have to be an expert in the subject at all to read and understand what is going on in this book. I agree with the other articles that maybe the C++ code itself didnt have the comments embedded in the code, but i felt each code was explained in the by other methods (via the paragraphs rather than the comments within the code) at any rate continuing on with my review of this book.

I am writing this review as a continuing student of Quantitative Finance, I finished with a master's in financial engineering, so that can give you a bit of a background that I have. I have not had a chance to look at the material since college, and I've been out of college for a good 7 years. So you can imagine I am a bit rusty in the subject. That being said, the author did an amazing job with this book in terms of introducing the subject and the author broke it down in a very plain and understandable method. I haven't looked at the material for a long time, and he broke it down in such a way that, well, let's just say that I think I understand the material better now after reading this book than when I was in college. The author broke the subject down in the following way,

1.), a quick fundamental of C++ programming,
2.) the mathematical models that are popular in the industry,
3) the numerical methods with EXAMPLES!!! I must reiterate this again, how important it is to explain theory with EXAMPLES with DATA so that one can check to make sure they are doing it correctly and that the calculations are correct. I can't even tell you how frustrating it is to read INTRODUCTORY books that do not have samples or examples of what they are trying to teach you. I am not advanced enough as a mathematician to understand theoretically what exactly is going on all the time, but the fact that the author gave data samples and showed a few iterations so that we know how it was calculated makes A BIG BIG DIFFERENCE in understanding the material. That in of itself makes this book highly recommended and utilitarian, especially for someone who is self taught.

Finally 4.) the bread and butter of C++ code, the author has the C++ codes and explains what the codes are doing at each step and how it works, now I'm by no means a C++ person, in fact I only took an introductory to Programming in C++ and have very little experience with object oriented C++ programming, HOWEVER, after reading through this, coming from an introductory to C++ class, I can say without a doubt that I understood what the code is doing. I am a bit more refined as a MATLAB programmer, so its not like I have zero experience with programming, however obviously C++ is a much bigger animal, since the author walks you step by step on how the code is set up and why its doing what its doing at each of the way, I mean it, this book is invaluable as a resource.

I haven't finished the book yet (I'm half way in the programming sections), but the main contents of the quantitative aspect is spot on, the C++ section is well written, and it was a pleasure to read. (still have to finish here) I definitely wish more quantitative finance books were written in a clear and concise method like this.

Last but not least, I forgot to mention another important part of this book, for each mathematical method, numerical method, and programming section, the author recommends the reader where to get more background information on the subject that he was on. I know I may be tooting the author's horn here, but I swear this book was written for me, because I was in the process of relearning C++ and I have been taking a bunch of these MOOC courses online to refresh my knowledge in the subject.

I can't thank the author enough for writing this book, and hope that he continues writing more on the subject.


http://www.packtpub.com/advanced-quan...

[Ivan Idris · Rating 4 out of 5]

Sunitha P. from Packt Publishing provided me with an e-book copy of “Advanced Quantitative Finance with C++” by Alonso Pena PhD. The book takes a do it yourself approach to pricing different types of options.

Chapter 1 “What is Quantitative Finance?” introduces the Bento Box consisting of contract description, theoretical model, numerical method and implementation. In my opinion a discussion/evaluation section should be added to the Bento Box. This section should cover assumptions, discuss error sources, accuracy and best way to implement this knowledge in the real world.
Chapter 2 “Mathematical Models” is heavy on mathematics and discusses various theoretical models.
Chapter 3 “Numerical Methods” covers binomial trees, Monte Carlo simulation and finite difference methods. The author gives tips on when each type of method is most effective.
Chapter 4 “Equity Derivatives in C++” is about equity derivatives also known as stock options with related C++ code.
Chapter 5 “Foreign Exchange Derivatives with C++” gives an overview of FX options including plain vanilla and barrier options.
Chapter 6 “Interest Rate Derivatives with C++” solves interest rate pricing problems.
Chapter 7 “Credit Derivatives with C++” gives examples of credit derivatives using the Bento Box methodology.
The appendices mention useful libraries for people who don’t want to take the DIY route and financial literature.

“Advanced Quantitative Finance with C++” seems to be a great book meant for people who want to learn how to implement pricing models from scratch. It takes more of a theoretical than empirical approach. In my opinion it would have been great to know, how well the models would perform with real data.

[Michele Adduci · Rating 4 out of 5]

The book is very linear and easy to read.
It covers a very good theoretical part on maths but it suffers a little bit on C++ part, not so well commented.
Besides this, the book is enjoyable but accessible only to those who have a good and solid mathematical background and a good knowledge of C++, since the comments in the source code are missing in some crucial parts.