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2023 | Buch

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Options and Derivatives Programming in C++23

Algorithms and Programming Techniques for the Financial Industry

verfasst von: Carlos Oliveira

Verlag: Apress

Enthalten in: Springer Professional "Wirtschaft+Technik" , Springer Professional "Technik" , Springer Professional "Wirtschaft"

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Über dieses Buch

This book is a hands-on guide for programmers who want to learn how C++ is used to develop solutions for options and derivatives trading in the financial industry. It explores the main algorithms and programming techniques used in implementing systems and solutions for trading options and derivatives. This updated edition will bring forward new advances in C++ software language and libraries, with a particular focus on the new C++23 standard.

The book starts by covering C++ language features that are frequently used to write financial software for options and derivatives. These features include the STL (standard template library), generic templates, functional programming, and support for numerical code. Examples include additional support for lambda functions with simplified syntax, improvements in automatic type detection for templates, custom literals, modules, constant expressions, and improved initialization strategies for C++ objects. This book also provides how-to examples that cover all the major tools and concepts used to build working solutions for quantitative finance. It discusses how to create bug-free and efficient applications, leveraging the knowledge of object-oriented and template-based programming. It has two new chapters covering backtesting option strategies and processing financial data.. It introduces the topics covered in the book in a logical and structured way, with lots of examples that will bring them to life.

Options and Derivatives Programming in C++23 has been written with the goal of reaching readers who are looking for a concise, algorithms-based book that provides basic information through well-targeted examples and ready to use solutions.

What You Will Learn

Gain insight into the fundamental challenges of the options and derivatives marketMaster the features of the C++ language used in quantitative financial programmingUnderstand quantitative finance algorithms for options and derivativesBuild pricing algorithms around the Black-Scholes model, and use binomial and differential equations methods

Who This Book Is For

Professional developers who have some experience with the C++ language and would like to leverage that knowledge into financial software development.

Inhaltsverzeichnis

Frontmatter

Chapter 1. Options Concepts

Abstract

In the last few decades, software development has become an integral part of the financial and investment industry. Advances in trading infrastructure, as well as the need for increased volume and liquidity, have prompted financial institutions to adopt computational techniques as part of their day-to-day operations. This means that there are many opportunities for computer scientists specializing in the design and development of automated strategies for trading and analyzing stocks, options, and other financial derivatives.

Carlos Oliveira

Chapter 2. Financial Derivatives

Abstract

Derivative is a general term used for contracts that have their price based on the value of an underlying asset. In particular, options are a standardized type of derivatives that gives the right to buy or sell the underlying asset at a particular price. Unlike options, however, general derivatives include a large number of nonstandard features that allow them to be created even for illiquid assets such as corporate credit risk or real estate mortgages.

Carlos Oliveira

Chapter 3. Basic C++ Algorithms

Abstract

To become a proficient software developer, it is essential to get a solid understanding of the basic algorithms used in an application area. This is especially applicable to financial derivatives, where some basic problems and algorithms are recurring. In this chapter, I examine some common algorithms encountered in C++ applications for analyzing and processing options and derivatives.

Carlos Oliveira

Chapter 4. Object-Oriented Techniques

Abstract

For the last 30 years, object-oriented techniques have become the standard for software design and development. Since C++ fully supports OO programming, it is essential that you have a good understanding of OO techniques in order to solve many of the challenges presented by options and derivatives programming.

Carlos Oliveira

Chapter 5. Design Patterns for Options Processing

Abstract

Design patterns are a set of common programming design elements that can be used to simplify the solution of recurring problems. With the use of OO techniques, design patterns can be cleanly implemented as a set of classes that work toward the solution of a common goal. These designs can then be reused and shared across applications.

Carlos Oliveira

Chapter 6. Template-Based Techniques

Abstract

C++ templates allow programmers to write generic code, which works without modification on different data types. Through the careful use of templates, C++ programmers can write expressive code with high performance and low overhead, without the need to rely exclusively on more computationally expensive object-oriented techniques, such as the design patterns presented in the previous chapter.

Carlos Oliveira

Chapter 7. STL for Derivatives Programming

Abstract

Modern financial programming in C++ makes heavy use of template-based algorithms. Many of the basic algorithms related to trading options and their derivatives are implemented in terms of function and class templates. This is done due to the superior advantages of templates in performance as well as their ability to improve code reuse.

Carlos Oliveira

Chapter 8. Functional Programming Techniques

Abstract

Functional programming is an implementation strategy that focuses on the direct use of functions as first-class objects. This means that in a functional program, you are allowed to create, store, and call functions and otherwise use them as if they were just another variable of the system. Functional code also simplifies programming decisions because it avoids changing state and mutable data. This type of functional manipulation allows programs to more closely express the desired behavior of the system and is particularly suitable to some application areas.

Carlos Oliveira

Chapter 9. Linear Algebra Algorithms

Abstract

Linear algebra (LA) techniques are used throughout the area of financial engineering and, in particular, in the analysis of options and other financial derivatives. These techniques are used, for example, to calculate the value of large portfolios, or to quickly price derivative instruments. This chapter contains an overview of LA algorithms and their implementation in C++.

Carlos Oliveira

Chapter 10. Algorithms for Numerical Analysis

Abstract

Equation solving is one of the main building blocks for financial algorithms used in the analysis of options and financial derivatives. This happens because of the nature of options pricing, which is based on the Black-Scholes pricing model. Many of the techniques that involve options pricing require the efficient solution of differential equations and other mathematical formulations.

Carlos Oliveira

Chapter 11. Models Based on Differential Equations

Abstract

Differential equations are equations that involve in their terms both a function and its mathematical derivatives. Many of these equations arise naturally from the analysis of economic models used for the pricing of options, such as the Black-Scholes model.

Carlos Oliveira

Chapter 12. Basic Models for Options Pricing

Abstract

Options pricing is the task of determining the fair value of a particular option, given a set of parameters that exactly determine the features of the option contracts, such as its expiration date, current volatility, and prevailing interest rates. Pricing options requires the use of efficient algorithms, because of frequent changes in prices and market volatility. For this reason, a number of models have been employed for this task in the area of quantitative finance.

Carlos Oliveira

Chapter 13. Monte Carlo Methods

Abstract

Among programming techniques used for trading equity markets, Monte Carlo simulation has a special place due to factors such as its wide applicability and easy implementation. These methods can be used to implement strategies for market analysis such as price forecasting, or to validate options trading strategies, for example.

Carlos Oliveira

Chapter 14. Backtesting Trading Strategies in C++

Abstract

Backtesting is a crucial process in the development and evaluation of trading strategies. It involves testing a trading algorithm or investment strategy using historical market data (instead of simulated data) to assess its performance and potential profitability under different conditions.

Carlos Oliveira

Chapter 15. Using C++ Libraries for Finance

Abstract

Writing good financial code is a difficult task, one that cannot be done in isolation. As a software engineer, you frequently need to collaborate with others to achieve your development goals. You also need to use code that has been written by other groups. In particular, developers are constantly using libraries created by other companies or open source projects. Integrating these libraries into your own work is a major step to improve productivity.

Carlos Oliveira

Chapter 16. Credit Derivatives

Abstract

A credit derivative is a financial contract that aims at reducing credit risk—that is, the risk of default posed by contracts established with a business counterparty. These kinds of derivatives have become increasingly popular in the last decade, because they allow the hedging of complex financial positions even in industries that are not covered by mainstream markets.

Carlos Oliveira

Chapter 17. Processing Financial Data

Abstract

Processing financial data in XML involves extracting, parsing, and analyzing information from XML files that contain financial data. XML (eXtensible Markup Language) is a popular format for structuring data, and it's commonly used in various industries, including finance.

Carlos Oliveira

Backmatter

Titel: Options and Derivatives Programming in C++23
verfasst von: Carlos Oliveira
Verlag: Apress
Electronic ISBN: 978-1-4842-9827-5
Print ISBN: 978-1-4842-9826-8
DOI: https://doi.org/10.1007/978-1-4842-9827-5