Financial Numerical Recipes in C ++.

Bernt Arne Ødegaard

Contents
On C++ and programming.
- Compiling and linking
- The structure of a C++ program
- Extending the language, the class concept.
  - date, an example class
- Const references
The value of time
- Present value.
- Internal rate of return.
  - Check for unique IRR
- Bonds
The term structure of interest rates and an object lesson
- Term structure calculations
- Using the currently observed term structure.
  - Linear Interpolation.
- The term structure as an object
- Implementing a term structure class
- Bond calculations using the term structure class
Futures algoritms.
- Pricing of futures contract.
Binomial option pricing
- Multiperiod binomial pricing
- Further reading
- Problems
Basic Option Pricing, the Black Scholes formula.
- Setup
- European call and put options, The Black Scholes analysis.
Warrants
- Warrant value in terms of assets
- Valuing warrants when observing the stock value
- Readings
Extending the Black Scholes formula
- Adjusting for payouts of the underlying.
  - Continous Payouts from underlying.
  - Dividends.
    - European Options on dividend-paying stock.
- American options.
  - Exact american call formula when stock is paying one dividend.
- Options on futures
  - Black's model
- Foreign Currency Options
- Perpetual puts and calls
- Readings
- Problems
Option pricing with binomial approximations
- Introduction
- Pricing of options in the Black Scholes setting
- Adjusting for payouts for the underlying
- Pricing options on stocks paying dividends using a binomial approximation
- Option on futures
- Foreign Currency options
- References
Finite Differences
- European Options.
- American Options.
Option pricing by simulation
- Simulating lognormally distributed random variables
- Pricing of European Call options
- Hedge parameters
- More general payoffs. Function prototypes
- Improving the efficiency in simulation
- More exotic options
- Exercises
Approximations
- A quadratic approximation to American prices due to Barone-Adesi and Whaley.
Average, lookback and other exotic options
- Bermudan options
- Asian options
- Lookback options
- Monte Carlo Pricing of options whose payoff depend on the whole price path
  - Generating a series of lognormally distributed variables
- Control variate
Alternatives to the Black Scholes type option formula
- Merton's Jump diffusion model.
Using a library for matrix algebra
- An example matrix class
- Finite Differences
- European Options
- American Options
Mean Variance Analysis.
- Introduction.
- Mean variance portfolios.
- Short sales constraints
Pricing of bond options, basic models
- Binomial bond option pricing
- Black Scholes bond option pricing
Credit risk
- The Merton Model
Term Structure Models
- The Nelson Siegel term structure approximation
- Cubic spline.
- Cox Ingersoll Ross.
- Vasicek
Binomial Term Structure models
- The Rendleman and Bartter model
- Readings
Term Structure Derivatives
- Vasicek bond option pricing
Normal Distribution approximations.
- The normal distribution function
- The cumulative normal distribution
- Multivariate normal
- Calculating cumulative bivariate normal probabilities
- Simulating random normal numbers
- Cumulative probabilities for general multivariate distributions
- References
- Exercises
C++ concepts
Installation
- Source availability
Acknowledgements.
Index
Bibliography

2003-10-22