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Excel add in development in C++ Aplications in finance - Dalton S.

Dalton S. Excel add in development in C++ Aplications in finance - Wiley publishing , 2005. - 425 p.
ISBN 0-470-02469-0
Download (direct link): exceladdindevelopmentincand2005.pdf
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Prototype xloper * stdcall create_discount_curve(xloper *input_table, xloper *method);
Type string " RPP"
Notes Returns an array {label, timestamp} or an error value. The first argument is required but as it is an xloper, Excel will always call the function, so that the function will need to check the xloper type. Returning a timestamp is a good idea when there is a need to know whether a data-feed is still feeding live rates or has been silent for more than a certain threshold time. The function needs to record the calling cell and determine if this is the first call or whether a curve has already been built by this caller. (See sections 9.6 on page 305 and 9.8 on page 309.) A strategy for cleaning up disused curves, where an instance of this function has been deleted, also needs to be implemented in the DLL.
Description Takes a reference to a discount curve returned by a call to create_discount_curve () above, and a date, and returns the (interpolated) discount curve value for that date.
Prototype xloper * stdcall get_discount_value(char *curve_ref, double date, xloper *rtn_type);
Type string "RCBP"
Notes Returns the discount function or other curve data at the given date, depending on the optional rtn_type argument, or an error value.
The above is a minimal set of curve functions. Others can easily be imagined and implemented, such as a function that returns an array of discount values corresponding to an array of input dates, or a function that calculates a forward rate given two dates and a day-basis. Functions that price complex derivatives can be implemented taking only a reference to a curve and to the data that describe the derivative, without the need to retrieve and store all the associated discount points in a spreadsheet.
374
Excel Add-in Development in C/C++
10.8 BUILDING TREES AND LATTICES
The construction of trees and lattices for pricing complex derivatives raises similar issues to those involved in curve-building. (For simplicity, the term tree is used for both trees and lattices.) In both cases decisions need to be made about whether or not to use a remote server. If the decision is to use a server, the same issues arise regarding how to inform dependent cells on the worksheet that the tree has changed, and how to retrieve tree information. (See the above section for a brief discussion of these points.) If the decision is to create the tree locally, then the model of one function that creates the tree and returns a reference for tree-dependent cells to refer to, works just as well for trees as for discount curves.
There is however, a new layer of complexity compared to curve building: whereas an efficient curve-building routine will be quick enough to run in foreground, simple enough to be included in a distributed add-in, and simple enough to have all its inputs available locally in a user’s workbook, the same might not be true of a tree. It may be that creating a simple tree might be fine in foreground on a modern fast machine, in which case the creation and reference functions need be no more complex than those for discount curves. However, a tree might be very much more complex to define and create, taking orders of magnitude more time to construct than a discount curve. In this case, the use of background threads becomes important.
Background threads can be used in two ways: (1) to communicate with a remote server that does all the work, or (2) to create and maintain a tree locally as a background task. (Sections 9.9 Multi-tasking, multi-threading and asynchronous calls in DLLs on page 316, and 9.10 A background task management class and strategy on page 320, cover these topics in detail.) Use of a remote server can be made without the use of background threads, although only if the communication between the two will always be fast enough to be done without slowing the recalculation of Excel unacceptably.
Trees also raise questions about using the worksheet as a tool for relating instances of tree nodes, by having one node to each cell or to a compact group of cells. This then supposes that the relationship between the nodes is set up on the spreadsheet. The flexibility that this provides might be ideal where the structure of the tree is experimental or irregular. However, there are some difficult conceptual barriers to overcome to make this work: tree construction is generally a multi-stage process. Trees that model interest rates might first be calibrated to the current yield curve, as represented by a set of discrete zero-coupon bond prices, then to a stochastic process that the rate is assumed to follow, perhaps represented by a set of market options prices. This may involve forward induction through the tree and backward induction, as well as numerical root-finding or error-minimising processes to match the input data. Excel is unidirectional when it comes to calculations, with a very clear line of dependence going one way only. Some of these things are too complex to leave entirely in the hands of Excel, even if the node objects are held within the DLL. In practice, it is easier to relate nodes to each other in code and have the worksheet functions act as an interface to the entire tree.
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