What is the role of C++ in pricing derivatives? Its role is fundamental. It allows us to implement the actual calculations that are required in order to solve the pricing problem. Using the preceding techniques to describe the dynamics of the underlying, we require to simulate many potential future scenarios describing its evolution. Say we ought to price a futures contract on the EUR/USD exchange rate with one year maturity. We have to simulate the future evolution of EUR/USD for each day for the next year (using equation 3). We can then compute the payoff at maturity (using equation 1). However, in order to compute the expected payoff (using equation 4), we need to simulate thousands of such possible evolutions via a technique known as Monte Carlo simulation. The set of steps required to complete this process is known as an algorithm. To price a derivative, we ought to construct such algorithm and then implement it in an advanced programming language such as C++. Of course C++ is not the only possible choice, other languages include Java, VBA, C#, Mathworks Matlab, and Wolfram Mathematica. However, C++ is an industry standard because it's flexible, fast, and portable. Also, through the years, several numerical libraries have been created to conduct complex numerical calculations in C++. Finally, C++ is a powerful modern object-oriented language.

It is always difficult to strike a balance between clarity and efficiency. We have aimed at making computer programs that are self-contained (not too object oriented) and self-explanatory. More advanced implementations are certainly possible, particularly in the context of larger financial pricing libraries in a corporate context. In this book, all the programs are implemented with the newest standard C++11 using Code::Blocks (http://www.codeblocks.org) and MinGW (http://www.mingw.org).