F# is a functional programming language that allows you to write simple code for complex problems. Currently, it is most commonly used in the financial sector. Quantitative finance makes heavy use of mathematics to model the real world. If you are interested in using F# for your day-to-day work or research in quantitative finance, this book is for you.
This book covers everything you need to know about using functional programming for quantitative finance. Using a functional programming language for quantitative finance will enable you to concentrate more on the model itself rather than the implementation details. Tutorials and snippets are summarized into a trading system throughout this book.
F#, together with .NET, provides a wide range of tools needed to produce high quality and efficient code, from prototyping to production. The example code snippets in this book can be extended into larger blocks of code, and reused and tested easily in a functional language. F# is considered one of the default functional languages of choice for financial and trading-related applications.
Chapter 1, Introducing F# Using Visual Studio, introduces you to F# and its roots in functional languages. You will learn how to use F# in Visual Studio and write your first application.
Chapter 2, Learning More About F#, teaches you more about F# as a language and illustrates the many sides of this paradigm language.
Chapter 3, Financial Mathematics and Numerical Analysis, introduces the toolset we'll need throughout the book to implement financial models and algorithms.
Chapter 4, Getting Started with Data Visualization, introduces some of the most common ways to use F# to visualize data and display information in a GUI.
Chapter 5, Learning Option Pricing, teaches you about options, the Black-Scholes formula and ways of exploring options using the tools at hand.
Chapter 6, Exploring Volatility, digs deeper into the world of Black-Scholes and teaches you about implied volatility.
Chapter 7, Getting Started with Order Types and Market Data, takes a rather pragmatic approach towards finance and implements a basic order management system.
Chapter 8, Setting Up the Trading System Project, builds the foundation for the project and shows how to connect to SQL Server and use LINQ for queries.
Chapter 9, Trading Volatility for Profit, studies various ways of monetizing through movements in volatility and the arbitrage opportunity defining the trading strategy for the project.
Chapter 10, Putting the Pieces Together, shows the final steps towards the complete trading system using a volatility arbitrage strategy and FIX 4.2.
Apart from an interest in F# and finance, you need a computer with Visual Studio 2012 installed. Visual Studio 2012 is the recommended IDE, supporting F# 3.0.
This book is for anyone interested in writing F# code in the financial domain, with a quantitative approach. The book is mainly intended to be a source of inspiration and uses a lot of working code examples to illustrate both the concepts of finance and F# as a functional language.
At the end of the book we develop a simple trading system for volatility arbitrage. Details about orders and the FIX protocol are explained, as well as the theory behind the strategy itself. This may work as a foundation for anyone interested in developing their own trading system based on options and volatility.
In this book, you will find a number of styles of text that distinguish between different kinds of information. Here are some examples of these styles, and an explanation of their meaning.
Code words in text, database table names, folder names, filenames, file extensions, pathnames, dummy URLs, user input are shown as follows: "First we set a flag in the constructor, WorkerSupportsCancellation = true, then we check a flag every time we iterate the calculation."
A block of code is set as follows:
let rec getSecondLastElement = function
| head :: tail :: [] -> head
| head :: tail -> getSecondLastElement tailWhen we wish to draw your attention to a particular part of a code block, the relevant lines or items are set in bold:
SocketConnectPort=9878
SocketConnectHost=192.168.0.25
FileStorePath=tempNew terms and important words are shown in bold. Words that you see on the screen, in menus or dialog boxes for example, appear in the text like this: "If you run this code, you will see a form with the title Displaying data in F#, like the one in the following screenshot."
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