Financial Numerical Recipes in C++

Contents......Page 2
Compiling and linking......Page 6
The structure of a C++ program......Page 7
concept.......Page 10
concepts......Page 17
Matrix Tools......Page 18
Linear algebra......Page 19
Solving linear equations......Page 23
Function definitions m files Flow control Plotting......Page 25
Libraries References......Page 26
Present value......Page 27
One interest rate with annual compounding......Page 28
Continously compounded interest......Page 35
Further readings......Page 36
Bond Pricing with a flat term structure......Page 37
Flat term structure with discrete, annual compounding......Page 38
Continously compounded interest......Page 48
Further readings......Page 51
The term structure of interest rates and an object lesson......Page 52
The interchangeability of discount factors, spot interest rates and forward interest rates......Page 53
The term structure as an object......Page 56
Using the currently observed term structure.......Page 59
Bond calculations with a general term structure and continous compound- ing......Page 65
Setup......Page 68
Calculation of frontier portfolios......Page 70
Efficient portfolios......Page 73
Allowing for a riskless asset.......Page 74
Efficient sets with risk free assets.......Page 75
The Sharpe Ratio......Page 76
Working with Mean Variance and CAPM......Page 77
Mean variance analysis using matrix libraries......Page 78
Pricing of futures contract.......Page 82
Pricing......Page 83
Multiperiod binomial pricing......Page 86
Basic Option Pricing, the Black Scholes formula......Page 90
The formula......Page 91
Understanding the why’s of the formula......Page 93
Partial derivatives.......Page 94
References......Page 99
Warrant value in terms of assets......Page 100
Valuing warrants when observing the stock value......Page 101
Readings......Page 102
Adjusting for payouts of the underlying.......Page 103
American options......Page 105
Options on futures......Page 109
Foreign Currency Options......Page 110
Perpetual puts and calls......Page 111
Readings......Page 112
Introduction......Page 113
Pricing of options in the Black Scholes setting......Page 114
How good is the binomial approximation?......Page 120
Adjusting for payouts for the underlying......Page 124
Pricing options on stocks paying dividends using a binomial approximation......Page 125
Option on futures......Page 129
Foreign Currency options......Page 131
References......Page 132
European Options.......Page 133
American Options.......Page 135
American Options......Page 138
European Options......Page 141
References......Page 142
Option pricing by simulation......Page 143
Pricing of European Call options......Page 144
Hedge parameters......Page 145
More general payoffs. Function prototypes......Page 147
Improving the efficiency in simulation......Page 148
More exotic options......Page 152
References......Page 153
The Johnson (1983) approximation......Page 154
An approximation to the American Put due to Geske and Johnson (1984)......Page 157
A quadratic approximation to American prices due to Barone–Adesi and Whaley.......Page 160
An alternative approximation to american options due to Bjerksund and Stensland (1993)......Page 163
Readings......Page 166
Bermudan options......Page 167
Asian options......Page 170
Lookback options......Page 171
Monte Carlo Pricing of options whose payoff depend on the whole price path......Page 173
Control variate......Page 176
References......Page 177
Introduction......Page 178
Delta calculation......Page 183
Implementation......Page 184
Further reading......Page 186
Merton’s Jump diffusion model.......Page 187
Hestons pricing formula for a stochastic volatility model......Page 189
Black Scholes bond option pricing......Page 192
Binomial bond option pricing......Page 194
The Merton Model......Page 196
Issues in implementation......Page 197
Term Structure Models......Page 198
The Nelson Siegel term structure approximation......Page 199
Extended Nelson Siegel models......Page 201
Cubic spline.......Page 203
Cox Ingersoll Ross.......Page 206
Vasicek......Page 209
Readings......Page 211
The Rendleman and Bartter model......Page 212
Readings......Page 214
The movement of interest rates......Page 215
Pricing bonds......Page 217
Callable bond......Page 219
Readings......Page 221
Building trees of term structures Ho Lee term structure class......Page 222
Pricing things......Page 225
References......Page 227
Vasicek bond option pricing......Page 228
Date & time revisited - BOOST libraries......Page 230
References......Page 231
A.1 The normal distribution function......Page 232
A.3 Multivariate normal......Page 233
A.4 Calculating cumulative bivariate normal probabilities......Page 234
A.5 Simulating random normal numbers......Page 236
A.8 References......Page 237
C++ concepts......Page 238
C.4 GSL......Page 240
C.5 Internet links......Page 241
Summarizing routine names......Page 242
E.1 Source availability......Page 252
C++ code......Page 253
MatLab code......Page 256
Index......Page 257
Biblio......Page 261