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Algorithmic Differentiation in Finance Explained

  • Marc Henrard

Part of the Financial Engineering Explained book series (FEX)

Table of contents

  1. Front Matter
    Pages i-xiii
  2. Marc Henrard
    Pages 1-13
  3. Marc Henrard
    Pages 31-48
  4. Marc Henrard
    Pages 49-65
  5. Marc Henrard
    Pages 77-97
  6. Back Matter
    Pages 99-103

About this book

Introduction

This book provides the first practical guide to the function and implementation of algorithmic differentiation in finance. Written in a highly accessible way, Algorithmic Differentiation Explained will take readers through all the major applications of AD in the derivatives setting with a focus on implementation. 

Algorithmic Differentiation (AD) has been popular in engineering and computer science, in areas such as fluid dynamics and data assimilation for many years.  Over the last decade, it has been increasingly (and successfully) applied to financial risk management, where it provides an efficient way to obtain financial instrument price derivatives with respect to the data inputs. Calculating derivatives exposure across a portfolio is no simple task.  It requires many complex calculations and a large amount of computer power, which in prohibitively expensive and can be time consuming.  Algorithmic differentiation techniques can be very successfully in computing Greeks and sensitivities of a portfolio with machine precision.

Written by a leading practitioner who works and programmes AD, it offers a practical analysis of all the major applications of AD in the derivatives setting and guides the reader towards implementation.  Open source code of the examples is provided with the book, with which readers can experiment and perform their own test scenarios without writing the related code themselves.

Keywords

Algorithmic differentiation Automatic differentiation Adjoint AD Tape Efficient derivatives Derivative pricing Finite difference Derivative pricing Greeks Quantitative Finance Library Bucketed Delta Sensitivity Sticky smile

Authors and affiliations

  • Marc Henrard
    • 1
  1. 1.Advisory PartnerOpen GammaLondonUnited Kingdom

Bibliographic information

  • DOI https://doi.org/10.1007/978-3-319-53979-9
  • Copyright Information The Editor(s) (if applicable) and The Author(s) 2017
  • Publisher Name Palgrave Macmillan, Cham
  • eBook Packages Economics and Finance
  • Print ISBN 978-3-319-53978-2
  • Online ISBN 978-3-319-53979-9
  • Buy this book on publisher's site
Industry Sectors
Finance, Business & Banking