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Financial Instrument Pricing Using C++, 2nd Edition by Daniel J. Duffy

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CHAPTER 1A Tour of C++ and Environs

riverrun, past Eve and Adam's, from swerve of shore to bend of bay, brings us by a commodius vicus of recirculation back to Howth Castle and Environs

—Joyce (1939)

1.1 Introduction and Objectives

This book is the second edition of Financial Instrument Pricing Using C++, also written by the author (Duffy, 2004B). The most important reason for writing this hands-on book is to reflect the many changes and improvements to the C++ language, in particular due to the announcement of the new standard C++11 (and to a lesser extent C++14 and C++17). It feels like a new language compared to C++03 and in a sense it is. First, C++11 improves and extends the syntax of C++03. Second, it has become a programming language that supports the functional programming model in addition to the object-oriented and generic programming models.

We apply modern C++ to design and implement applications in computational finance, in particular option pricing problems using partial differential equation (PDE)/finite difference method (FDM), Monte Carlo and lattice models. We show the benefits of using C++11 compared to similar solutions in C++03. The resulting code tends to be more maintainable and extendible, especially if the software system has been properly designed. We recommend spending some time on designing the software system before jumping into code and to this end we include a defined process to take a problem description, design the problem and then implement ...

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