Modeling Financial Markets : Using Visual Basic.NET and Databases to Create Pricing, Trading, and Risk Management Models [Hardcover]

Benjamin Van Vliet (Author), Robert Hendry (Author)

Book Description

ISBN-10: 0071417729 | ISBN-13: 978-0071417723 | Publication Date: January 21, 2004 | Edition: 1

Limitations in today's software packages for financial modeling system development can threaten the viability of any system--not to mention the firm using that system. Modeling Financial Markets is the first book to take financial professionals beyond those limitations to introduce safer, more sophisticated modeling methods. It contains dozens of techniques for financial modeling in code that minimize or avoid current software deficiencies, and addresses the crucial crossover stage in which prototypes are converted to fully coded models.

Editorial Reviews

From the Back Cover

A Step-by-Step Process for Reaching the Next Level of Sophistication--and Success--In Financial Modeling and Trading System Development

Financial markets professionals today must sort, analyze, and act upon incredible amounts of data. This has led to increasing reliance on computer-based risk management models. Limitations in popular software packages for financial modeling system development, however, can threaten the viability of any system--not to mention the firm using that system.

Modeling Financial Markets takes traders and money managers beyond those limitations by helping them design more consistent, sophisticated, and versatile modeling methods. This high-level, hands-on book features:

• Guidelines for maneuvering around the Visual Basic.NET integrated development environment (IDE) and customizing it to improve your development efficiency
• Dozens of innovative and useful techniques for financial modeling in code that minimize or avoid current software deficiencies
• An approach for delivering an evaluation and specification prototype in Excel, one that is scalable into either VB.NET or another implementation language

The need for complex yet usable financial modeling systems has never been greater. Let Modeling Financial Markets help you progress beyond static modeling programs to more sophisticated system development processes, then implement those processes in your actual trading methodology.

"In a sense, this book marries four disciplines--computer science, quantitative finance, trading strategy and quality development--into one, financial engineering. It is about modeling financial instruments in code and putting the pieces, or models, together to create an automated trading or risk management system. Let's get started...

--From the Introduction

Human traders--using strategies that combine technical and fundamental indicators with gut instincts and market savvy--are quite possibly an endangered species. They are being replaced by quantifying trading systems capable of watching hundreds of securities and derivatives simultaneously and, at the exact second that conditions are most favorable, executing hundreds of strategies in a millisecond.

These systems, however, must still be designed and constructed by financial engineers. Modeling Financial Markets is today's most in-depth exploration of the Visual Basic.NET programming concepts that relate to research, testing, and implementation of pricing models, trading systems, and risk management systems. It provides innovative techniques for overcoming systemic shortcomings in Excel/VBA, along with insights and guidelines for managing the crucial, sink-or-swim crossover stage when prototypes are converted to fully coded models.

Virtually every vital tool needed to construct and implement a quantitative trading or risk management system is detailed, providing you with a basic understanding of:

• Visual Basic.NET
• Relational database design
• Structured Query Language (SQL)
• Extensible Markup Language (XML)
• Financial industry protocol FIXML
• Object Oriented programming (OOP)
• Application Programming Interfaces (API) for optimization
• API for market data feeds, trade entry, and trade fill information
• Objects and collections to clean data
• In sample / out of sample testing
• Code for matrix algebra and multiple linear regression

Modeling Financial Markets builds several important financial topics from the ground up, and always places the emphasis on the implementation of systems in actual trading situations and arenas. Sophisticated yet written and arranged for easy understanding and implementation, it is the first book to take finance professionals beyond the limitations of today's software and processes to introduce safer, more effective, and more accurate financial modeling methods.

About the Author

Benjamin Van Vliet is the associate director of the M.S. in Financial Markets program at the Stuart Graduate School of Business, Illinois Institute of Technology in Chicago, where he teaches courses in quantitative finance and modeling. He is also a principal at the Office for Market Technology, Inc., a consulting company that provides its clients with trading automation solutions, corporate training, and research in the financial markets.

Robert Hendry is an independent software development consultant specializing in client/server and Internet projects for Fortune 500 companies. An instructor at the Illinois Institute of Technology, Hendry is editor in chief of the PowerBuilder Developers' Journal, product reviewer for Wireless Business & Technology magazine, and a member of the USA Today Technology Panel.

Product Details

• Hardcover: 304 pages
• Publisher: McGraw-Hill; 1 edition (January 21, 2004)
• Language: English
• ISBN-10: 0071417729
• ISBN-13: 978-0071417723
• Product Dimensions: 9.1 x 6.1 x 1.6 inches
• Shipping Weight: 1.6 pounds
• Average Customer Review: 4.1 out of 5 stars  See all reviews (11 customer reviews)
• Amazon Best Sellers Rank: #1,304,833 in Books (See Top 100 in Books)

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Customer Reviews

Most Helpful Customer Reviews

24 of 26 people found the following review helpful:

2.0 out of 5 stars How to Program book - not Financial Modeling, July 21, 2005

By 

Guy Bloomfield "guy bloomfield" (Chicago IL) - See all my reviews

This review is from: Modeling Financial Markets : Using Visual Basic.NET and Databases to Create Pricing, Trading, and Risk Management Models (Hardcover)

This is a "How To Program" book which uses financial applications as samples. It is heavy on programming basics and scratches the surface of financial modeling. That's fine if that's what you expect from the book, but the title led me to believe that I'd learn modeling techniques. I expected a book that assumed proficiency in VB and dealt with moderate to advanced financial topics.

If you already know what a where clause is and are proficient at VB.Net, this is not for you. If you know nothing about VB and want to learn it using interesting examples, this is for you.

11 of 11 people found the following review helpful:

4.0 out of 5 stars Good Intro to .NET for Financial Systems Engineers, September 19, 2004

By 

Alan B. Corwin (Bremerton, WA United States) - See all my reviews
(REAL NAME)   

This review is from: Modeling Financial Markets : Using Visual Basic.NET and Databases to Create Pricing, Trading, and Risk Management Models (Hardcover)

I'm a software engineer who read this while developing an automated trading system. I think the book was aimed more at people who know financial systems engineering but do not know .NET rather than at programmers trying to build financial systems, but I still found it very useful (useful enough so that I have read it twice already). It is well-written and provides insight in a number of different areas.
The VB.NET stuff is mostly solid, but anyone wants to use .NET to perform these chores should also read a book that provides a thorough introduction to datasets. Much of the database-centered guidance in the book ignores the dataset, and the dataset is what makes .NET the ideal tool for web database applications. For example, they devote many pages to telling people how to write out an XML file, a chore you can do with a dataset with one line of code (and the dataset never makes a mistake).

14 of 17 people found the following review helpful:

5.0 out of 5 stars Best programming book I have ever had., February 1, 2005

By 

John S. Haworth - See all my reviews
(REAL NAME)   

This review is from: Modeling Financial Markets : Using Visual Basic.NET and Databases to Create Pricing, Trading, and Risk Management Models (Hardcover)

I am a student at IIT and took Professor VanVliet's course so that I could write some risk management and trading programs in VB.Net. I have had classes and some previous experience in C, C++, COBOL, and Visual Basic.

We used "Modeling Financial Markets" in the class. It was a very demanding class but you LEARNED the material. The great thing was, however, that you could read his book before the lecture and understand the concepts and applications before you came to class. It is a GREAT practitioner's manual.

I have written several major applications since taking the class last August and do use some other books as references. However, this book should not be just a book sitting on your shelf as an occasional reference:read the entire book because it can get you up and running as a programmer unlike anything else I have read (and I have read a lot in my 43 years). The SAMMs series,Microsoft Press stuff, etc. don't even come close.

The book is well organized. I use it as my first reference when programming in VB.Net. It is especially strong in its chapters on ADO.Net (datatables, dataviews, etc). There is more to be learned but this book gives you a lot of meat and honestly covers probably 95% of what I have needed to know as I write more complex applications.

In each chapter in the front of the chapter the book outlines the key methods, objects, etc. For arrays for example the book summarizes what can be done to an array: how to get an element count, how to sort it, etc. He does this for collections, datatables,hashtables, etc.

There are a few typos in the book code BUT since a CD is included with code that works you can always just cut and paste the code out of the CD. If some code doesn't work you just go to the CD. Which is another thing:the book actually has complete programs as examples, not just little snippets that are not put in the context of a larger program.

The chapter on SQL is a great way to get started programming SQL. If you are using ACCESS as your database be careful to check the datatypes because they are different than those in Oracle. The book mentions VARCHAR2(),and NUMERIC(,): these are Oracle-only datatypes. I found that a great companion book to this one is Patrick's "SQL Fundamentals". (It has a nice section comparing and contrasting datatypes not to mention tons of easy to follow examples on how to write simple and complex SQL statements. This is another great PRACTITIONER book like "Modeling Financial Markets". I contrast these two books to books written by academics trying to show everyone how smart they are).

I would recommend "Modeling Financial Markets" for those outside of the financial areas as well. It just is a quick way to become an effective programmer. It cuts through a lot of the jargon that make many books nearly impossible to read.