Review of Modeling Derivatives in C++ (Wiley Finance) (Paperback)

Like some other reviews (some of which have been removed by Amazon) have pointed out, this book is comprehensive, covers most of the right topics yet have some major flaws that prevent it from being truly useful to the students of financial engineering. It successfully COMPILES and DOCUMENTS the derivatives models in C++ but it is less sucessful in TEACHING the process of building these C++ modules. I look forward to a 2nd edition.

The author makes an honest attempt to show the mathematical and financial theories underpining the models and present the associated C++ code. However, the models and the associate codes are presented in a encyclopedia-like fashion. Moreover the codes are 'borrowed' from various sources, including the open source quantlib project, thus there's a lack of consistency. From page to page, you are directed to codes with very different coding styles. Therefore there's disjointed feel to this book.

What I would like to see a its 2nd edition are the following:
1. Relegate the code snippets to the appendix section (or just put them in the CD) and present only the neccesary codes next to the models.
2. Write his own codes or just adopt quantlib's library directly and change the title to Derivatives C++ 2nd edition: a quantlib approach. Consistency in the coding is important.
3. Decide what's the target audience of the book and what is the main object of this book? is it to teach people 'HOW' to map derivatives models to C++, is it to document 'WHAT' derivatives models and the associated C++ codes are out there.

Overall this book is promising, is ambitious in its coverage, but would benefit from a major revision. For its efforts and intentions, I would rate is 3 stars.

An alternative way (IMHO a much better way) to learn Derivatives C++ programming is to take a bottom up approach and learn the various components separately:

Mathematical Finance: Hull (2005, comprehensive coverage of derivatives models); Wilmott/Howison/Dewynne (1995, The mathematics of financial derivatives); Joshi (2005, The Concepts and practice of mathematical finance)

Mapping of mathematical models to computer programs (pseudocodes): Clewlow/Strickland (1998), Lyuu (2001), Seydel (2003)

Programming in C++: any introductory book in C++ would do (I like Deitel & Deitel); Object-oriented C++ and STL

Also need to learn the linear algebra and how to manipulate matrices and system of linear equations in C++.






Product Description
This book is the definitive and most comprehensive guide to modeling derivatives in C++ today. Providing readers with not only the theory and math behind the models, as well as the fundamental concepts of financial engineering, but also actual robust object-oriented C++ code, this is a practical introduction to the most important derivative models used in practice today, including equity (standard and exotics including barrier, lookback, and Asian) and fixed income (bonds, caps, swaptions, swaps, credit) derivatives. The book provides complete C++ implementations for many of the most important derivatives and interest rate pricing models used on Wall Street including Hull-White, BDT, CIR, HJM, and LIBOR Market Model. London illustrates the practical and efficient implementations of these models in real-world situations and discusses the mathematical underpinnings and derivation of the models in a detailed yet accessible manner illustrated by many examples with numerical data as well as real market data. A companion CD contains quantitative libraries, tools, applications, and resources that will be of value to those doing quantitative programming and analysis in C++. Filled with practical advice and helpful tools, Modeling Derivatives in C++ will help readers succeed in understanding and implementing C++ when modeling all types of derivatives.

About the Author
Justin London is the founder and visionary of GlobalMaxTrading.com (GMT), The World's Online Financial Supermarket®, a global online trading and financial technology company, as well as GlobalMaxAuctions.com, The World's Online Trading Exchange ®, a global B2C and B2B auction and trading company. He has analyzed and managed bank corporate loan portfolios using credit derivatives in the Asset Portfolio Management Group of a large bank in Chicago, Illinois. He has developed fixed-income and equity models for trading companies and his own quantitative consulting firm. London has written code and algorithms in C++ to price and hedge various equity and fixed-income derivatives with a focus on building interest rate models. A graduate of the University of Michigan, London has five degrees, including a BA in economics and mathematics, an MA in applied economics, and an MS in financial engineering, computer science, and mathematics, respectively.

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