Review of Advanced Quantitative Finance with C++

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.

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