Derivatives Algorithms Volume 1 Bones 1st Edition by Thomas Hyer ISBN 9814289809 9789814289801

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ISBN 10: 9814289809 
ISBN 13: 9789814289801
Author: Thomas Hyer

Derivatives Algorithms provides a unique expert overview of the abstractions and coding methods which support real-world derivatives trading. Written by an industry professional with extensive experience in large-scale trading operations, it describes the fundamentals of library code structure, and innovative advanced solutions to thorny issues in implementation. For the reader already familiar with C++ and arbitrage-free pricing, the book offers an invaluable glimpse of how they combine on an industrial scale. Topics range from interface design through code generation to the protocols that support ever more complex trades and models.

Derivatives Algorithms Volume 1 Bones 1st Table of contents:

• Chapter 1: Introduction to the Bones

  • Introduction to the project and the library’s design philosophy.

  • Setting up the C++ development environment.

  • Review of essential C++ features for quantitative finance (e.g., classes, templates, exceptions).

• Chapter 2: Mathematical Functions

  • Implementation of common mathematical functions needed in finance.

  • Numerical differentiation and integration techniques.

  • Root-finding algorithms (e.g., Newton-Raphson method).

• Chapter 3: Probability Distributions

  • The implementation of key probability distribution functions.

  • Normal distribution and cumulative distribution functions.

  • Random number generation for simulations.

• Chapter 4: Time and Date Objects

  • Designing and implementing a robust Date class.

  • Handling date arithmetic, day count conventions, and calendars.

  • Calculating bond and interest rate-related periods.

• Chapter 5: Option Pricing Fundamentals

  • An in-depth look at the Black-Scholes-Merton model.

  • Implementation of the Black-Scholes formula in C++.

  • Calculating European call and put option prices.

• Chapter 6: The Greeks: Sensitivities and Risk Management

  • Implementation of the “Greeks” (Delta, Gamma, Vega, Theta, Rho).

  • Numerical vs. analytical approaches to calculating Greeks.

  • Using the Date class to calculate Theta accurately.

• Chapter 7: Volatility

  • Historical vs. implied volatility.

  • Implementation of algorithms for calculating implied volatility (e.g., using a root-finding algorithm).

  • Introduction to the volatility surface.

• Chapter 8: Putting It All Together: Vanilla Options

  • Building a comprehensive C++ class for European vanilla options.

  • Integrating the Black-Scholes class, Date class, and Greeks calculations into a single, cohesive framework.

• Chapter 9: The Monte Carlo Method

  • Introduction to Monte Carlo simulation for pricing derivatives.

  • Generating paths for underlying assets.

  • Implementing a basic Monte Carlo pricer for simple options.

• Chapter 10: Introduction to American Options

  • Understanding the early exercise feature of American options.

  • Introduction to basic numerical methods for pricing them (e.g., binomial trees).

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