See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/325807627

Practical C# and WPF for Financial Markets

Book · September 2016

CITATIONS READS
0 8,500

1 author:

Ji-Hai Xu
drxudotnet.com
43 PUBLICATIONS 735 CITATIONS

SEE PROFILE

All content following this page was uploaded by Ji-Hai Xu on 17 June 2018.

The user has requested enhancement of the downloaded file.

Practical C# and WPF
For Financial Markets
Advanced C#, WPF, and MVVM Programming
for Quant Developers/Analysts and Individual Traders
Practical C# and WPF
For Financial Markets
Advanced C#, WPF, and MVVM Programming
for Quant Developers/Analysts
and Individual Traders

Jack Xu, PhD

UniCAD Publishing
Practical C# and WPF for Financial Markets
Copyright © 2016 by Jack Xu, PhD
Printed and bound in the United States of America 9 8 7 6 5 4 3 2 1UC

Editor: Tyler Xu

All rights reserved. No part of the contents of this book and corresponding example source code may be
reproduced or transmitted in any form or by any means without the written permission of the author.

The author has made every effort in the preparation of this book to ensure the accuracy of the information;
however, this book is sold without warranty, either express or implied. No liability is assumed for incidental or
consequential damages in connection with or arising out of the use of the information or programs contained in
the book.

Published by UniCAD Publishing.

New York, USA
ISBN-13: 978-0-9793725-5-1
ISBN-10: 0-9793725-5-0

Publisher’s Cataloging-in-Publication Data

Xu, Jack
Practical C# and WPF for Financial Markets – Advanced C#, WPF, and MVVM Programming for Quant
Developers/Analysts and Individual Traders/ Jack Xu
– 1st ed.
p.cm.
ISBN 978-0-9793725-5-1

1. C# Programming. 2. Finance. 3. Quant. 4. Windows Presentation Foundation. 5. Quant Developer. 6.

MVVM 7. Quant Analyst. 8. Stock Trading. 9. Option Trading. 10. SQL Database. 11. Pricing Engines.
I. Title. II. Title. III Title: Practical C# and WPF Programming for Financial Markets
For my wonderful family
 Contents

Introduction .......................................................................................... xiii

Overview ........................................................................................................ xiii
What this Book Includes ................................................................................ xiv
Is This Book for You? .................................................................................... xv
What Do You Need to Use This Book? .......................................................... xv
How the Book Is Organized........................................................................... xvi
Structure of Sample Projects......................................................................... xvii
Using Code Examples .................................................................................. xviii
Customer Support ........................................................................................ xviii

Chapter 1 Overview of C# and WPF Programming ............................ 1

New Features in WPF ....................................................................................... 1
XAML basics .................................................................................................... 2
Why Is XAML Needed? ......................................................................... 2
Creating XAML Files ............................................................................. 3
Code-Behind Files ................................................................................... 3
Your First WPF Program .................................................................................. 4
Properties in XAML ................................................................................ 4
Event Handlers in Code-Behind Files ..................................................... 6
Code-Only Example ................................................................................ 7
XAML-Only Example ............................................................................ 9

Chapter 2 Introduction to MVVM ....................................................... 11

Open-Source MVVM Tool Kits ..................................................................... 12
Caliburn.Micro ................................................................................................ 13
Bootstrapper Class ................................................................................ 13
Modify App.xaml File ........................................................................... 15
Why Fields Not Updated ................................................................................ 15
Right Way for Data Binding ........................................................................... 19
Using Dependency Properties ......................................................................... 22
Using Naming Convention ............................................................................. 25
viii | Contents

Using Collection ............................................................................................. 28

Communication between View Models .......................................................... 32

Chapter 3 Database ................................................................................ 43

Local Database ................................................................................................ 44
Sample Database ................................................................................... 46
SQL Queries .......................................................................................... 47
GROUP BY Clause ..................................................................... 47
Pivot Operation ............................................................................ 49
Aggregate Functions .................................................................... 53
Database Development .......................................................................... 54
ADO.NET Entity Framework ......................................................................... 59
Creating Entity Data Model .................................................................. 60
Working with Entity Data ..................................................................... 63

Chapter 4 Market Data ......................................................................... 71

Market Data from Yahoo ................................................................................ 71
EOD Stock Data .................................................................................... 71
Stock Quotes ......................................................................................... 73
Download Market Data from Yahoo..................................................... 79
Store Market Data ........................................................................................... 82
Add Tickers to Database ....................................................................... 83
Add Stock Data to Database ................................................................. 89
Market Data from Google ............................................................................... 96
EOD and Minute-Bar Data for Stocks .................................................. 97
Real-Time Stock Quotes ..................................................................... 102
Download Market Data from Google ................................................. 107
Option Chain Data............................................................................... 111
Market Data from Quandl ............................................................................. 117
Quandl API.......................................................................................... 118
Adjusted Stock EOD Data .................................................................. 119
Other Market Data ............................................................................... 122
ISDA Rates from Markit............................................................................... 124
ISDA Interest Rate API ....................................................................... 125
Download Interest Rates ..................................................................... 129
Market Data from Bloomberg....................................................................... 131
Bloomberg API ................................................................................... 132
Download Market Data from Bloomberg ........................................... 138

Chapter 5 Data Visualization .............................................................. 143

 Contents | ix

2D Chart Control .......................................................................................... 144

Simple Line Charts .............................................................................. 144
Line Chart with Multiple Lines ........................................................... 146
Line Charts with Two Y Axes ............................................................. 148
Stock Charts ........................................................................................ 152
3D Chart Control .......................................................................................... 158
3D Line Charts .................................................................................... 158
3D Surface-Like Charts....................................................................... 160
3D Specialized Charts ......................................................................... 167
MS Chart Control.......................................................................................... 178
WPF Compatible MS Chart Control ................................................... 178
Helper Class ........................................................................................ 185
Simple MS Charts ............................................................................... 189
Stock Charts ........................................................................................ 193
Real-Time Stock Charts ...................................................................... 201

Chapter 6 Linear Analysis .................................................................. 207

Simple Linear Regression ............................................................................. 207
Implementation ................................................................................... 208
R-Squared ............................................................................................ 209
What are Alpha and Beta?................................................................... 211
Simple Regression Applications ......................................................... 211
Simple 2D PCA ............................................................................................ 218
Implementation ................................................................................... 219
Simple PCA applications .................................................................... 221
Comparing Linear Regression and PCA ....................................................... 224
Multiple Linear Regressions ......................................................................... 230
Helper Class ........................................................................................ 231
Multiple Regression Applications ....................................................... 233
Multiple PCA ................................................................................................ 239
Implementation ................................................................................... 239
Multiple PCA Applications ................................................................. 241

Chapter 7 Technical Indicators .......................................................... 249

Indicators in MsChart Control ...................................................................... 249
Helper Class .................................................................................................. 252
Indicator Chart with Two Chart Areas ................................................ 252
Indicator Chart with Three Chart Areas .............................................. 256
Technical Indicator Applications .................................................................. 261
Understand Technical Indicators .................................................................. 269
x | Contents

Moving Average Based Indicators ...................................................... 269

Envelope and Bollinger Band Indicators ............................................ 273
MACD and RSI Indicators .................................................................. 273
On Balance Volume Indicator ............................................................. 275
Accumulation/Distribution Indicator .................................................. 278
Williams %R Indicator ........................................................................ 278
Stochastic Indicator ............................................................................. 279
Commodity Channel Index Indicator .................................................. 281

Chapter 8 Machine Learning .............................................................. 285

K-Nearest Neighbors (KNN) Classifier ........................................................ 285
KNN Model for Stock Data ................................................................ 286
KNN Model Applications ................................................................... 287
Confusion Matrix ................................................................................ 298
Support Vector Machine ............................................................................... 301
SVM for Classification ....................................................................... 302
SVM for Regression ............................................................................ 310
Artificial Neural Networks ........................................................................... 312
Introduction to Neural Networks ........................................................ 313
Neural Networks for Classification ..................................................... 314
Neural Network for Regression .......................................................... 329
Simple Example ......................................................................... 330
Stock Price Prediction ............................................................... 342
Save and Reuse Network ........................................................... 357

Chapter 9 Options Pricing .................................................................. 361

Introduction to Options ................................................................................. 361
Option Payoffs .................................................................................... 362
Option Value ....................................................................................... 362
Pricing European Options ............................................................................. 363
Black-Scholes Model .......................................................................... 363
Generalized Black-Scholes Model ...................................................... 364
Implementation ................................................................................... 365
Black-Scholes Greeks ......................................................................... 373
Delta........................................................................................... 373
Gamma....................................................................................... 376
Theta .......................................................................................... 377
Rho............................................................................................. 380
Vega ........................................................................................... 383
Implied Volatility ................................................................................ 384
 Contents | xi

Pricing American Options ............................................................................ 391

BAW Approximation .......................................................................... 391
Implementation ................................................................................... 392
Applying BAW Approximation .......................................................... 395
Pricing Barrier Options ................................................................................. 399
Standard Barrier Option Formulas ...................................................... 400
Implementation ................................................................................... 402
Barrier Option Applications ................................................................ 408
Pricing European Options Using QuantLib .................................................. 412
Dates, Calendars, and Day Counters in QuantLib .............................. 412
Term Structures in QuantLib .............................................................. 414
Helper Class ........................................................................................ 414
Using Pricing Engines ......................................................................... 419
Pricing American Options Using QuantLib.................................................. 424
Helper Class ........................................................................................ 424
Using Pricing Engines ......................................................................... 427
Pricing Exotic Options using QuantLib ........................................................ 431
Barrier Options .................................................................................... 432
Bermudan Options .............................................................................. 438
Pricing American Options in Real-World .................................................... 443
Term Structure for Interest Rates ........................................................ 444
Dividend Yield Curve ......................................................................... 445
Volatility Smile ................................................................................... 446
American Options Pricing ................................................................... 447

Chapter 10 Pricing Fixed-Income Instruments ................................ 453

Simple Bonds Pricing ................................................................................... 453
Discounting Factors ............................................................................ 454
Pricing Bonds with Flat Rates ............................................................. 455
Compounding Frequency Conventions ............................................... 461
Pricing Bonds with a Simple Rate Curve ............................................ 463
Yield to Maturity ................................................................................. 465
Zero-Coupon Yield Curve ............................................................................ 466
Treasury Zero-Coupon Yield Curve ................................................... 467
Interbank Zero-Coupon Yield Curve .................................................. 476
Credit Spread Term Structures ............................................................ 480
Bonds with Embedded Options .................................................................... 484
Callable Bonds .................................................................................... 485
Convertible Bonds ............................................................................... 492
CDS Pricing .................................................................................................. 496
xii | Contents

Hazard Rate and Default Probability .................................................. 497

Risky Annuities and Risky Durations ................................................. 505
CDS Pricing Engine ............................................................................ 506

Chapter 11 Trading Strategies and Backtesting ............................... 517

Trading Strategy Identification ..................................................................... 517
Trading Signals ............................................................................................. 519
Stock Data ........................................................................................... 520
Signals from Moving Average ............................................................ 522
Signals from Linear Regression .......................................................... 524
Signals from RSI ................................................................................. 525
Signals from Williams %R.................................................................. 527
Backtesting System Implementation ............................................................ 529
P&L Computation ............................................................................... 529
Risk Measures ..................................................................................... 533
Backtesting System Applications ................................................................. 536
Backtesting for US Stocks .................................................................. 536
Optimization ........................................................................................ 549
Pairs Trading ................................................................................................. 562
Pairs Identification .............................................................................. 562
Signals for Pairs Trading ..................................................................... 564
Market Neutral .................................................................................... 566
P&L for Pairs Trading ......................................................................... 567
Backtesting for Pairs Trading ....................................................................... 568
Backtesting for Stock Pairs ................................................................. 568
Optimization ........................................................................................ 580

Index ...................................................................................................... 593

 Introduction

Overview
Welcome to Practical C# and WPF for Financial Markets. This book will provide all the tools you need
to develop professional financial applications using the C#, the Windows Presentation Foundation
(WPF), and the Model-View-View Model (MVVM) pattern based on the .NET Framework. I hope that
this book will be useful for quant developers, quant analysts, individual traders, .NET programmers, and
students of all skill levels.
In recent years, quantitative finance has been an attractive field due to the intellectual challenge and high
remuneration. Many scientists, engineers, and students wish to change their careers to become a quant
developer/analyst in investment banks or hedge fund firms. Most of them have solid background in
mathematics, statistical analysis, physics modeling, and programming, but lack knowledge and
experience in quantitative finance. A question that they constantly ask is “what do I need to prepare
myself to become a quant developer and analyst?” This book will provide answer to this question and
prepare you with solid technical skills in quantitative analysis and development.
On the other hand, more and more individuals want to become independent (“retail”) quantitative traders
who are looking to start their own quantitative or algorithmic trading business. The most common issue
they are facing is what kind of background do they need in order to be success in quantitative trading?
Most of those individuals received their advanced degrees in physics, math, engineering, or computer
science. This kind of training in hard sciences will give them an edge in quantitative analysis and pricing
complex derivative instruments. However, the capability to convert trading ideas into trading strategies
and the programming skill in implementing the automatic trading system are equally important. This
book will prepare you with all the necessary analysis and programming techniques to become a well-
equipped individual quant trader.
So what programming languages are most commonly used in quantitative finance? No doubt about it,
C++ is traditionally associated with finance applications for pricing complex derivative securities, and
much of the older financial infrastructure is also based on C++. C# and .NET Framework are a relatively
new technology comparing to C++. This book will choose C# and WPF as our programming framework
in developing various business applications in financial markets.
The reason for using C# in this book is that C# is relatively easy to learn comparing to C++. Scientists,
engineers, students, quants, and traders can learn C# and use it to develop financial applications quickly.
xiv | Introduction

People with a background in VBA, R, Python, Matlab, or Java will find the transition to C# much easier
than the transition to C++. Furthermore, in many cases developers’ productivity levels are much higher
than those achieved with C++. It is also possible to create interoperable .NET applications that contains
different technologies such as C++ and VBA legacy code.
The two key features in WPF, data binding and MVVM pattern, can further enhance developers’
productivity. The data binding provides a simple and consistent way for .NET applications to present
and interact with data. It has several advantages over traditional models, including a broad range of
properties that inherently support data binding, flexible UI (user interface) representation of data, and
clean separation of business logic from UI. The MVVM pattern is the most used architecture for WPF
applications. MVVM introduces three layers of separation of application code, namely, Model, View,
and ViewModel. View holds the actual UI; ViewModel holds the collection of properties, commands, and
property changed notifications; while Model holds business data, business logic, and business rule. You
will gain several advantages of using MVVM pattern, including 1) proper separation of the view and the
data. The data is not stored in view and the view is just for presenting the data; 2) clean testable and
manageable code; and 3) no code-behind so the presentation layer and the logic are loosely coupled.
I write this book with the intention of providing a complete and comprehensive explanation of C# and
WPF programming in quantitative finance. This book pays special attention to creating various business
applications and reusable .NET libraries that can be used directly in real-world finance applications.
Much of this book contains the original work based on my own programming experience when I was
developing business applications for quantitative analysis in financial field.
Practical C# and WPF for Financial Markets provides everything you need to create your own advanced
applications in quantitative finance and reusable packages using C# and WPF based on MVVM pattern.
It shows you how to use C# and WPF to create a variety of financial applications that range from simple
database, market data API, data visualization, quantitative analysis to pricing equity options and
complex fixed income instruments, machine learning, and trading strategy development. I will try my
best to introduce you to C# and WPF programming in quantitative finance in a simple way – simple
enough to be easily followed by a quant or .NET developer who has basic prior experience in developing
business applications using .NET technology.

What this Book Includes

This book and its sample code listings, which are available for download at my website at
www.drxudotnet.com, provide you with:
 A complete, in-depth instruction to practical quantitative finance programming with C#, WPF, and
MVVM. After reading this book and running the example programs, you will be able to create
various sophisticated business applications in quantitative finance using the .NET technology.
 Ready-to-run example programs that allow you to explore the quantitative finance programming
techniques and understand how the algorithms work. You can modify the code examples or add
new features to them to form the basis of your own projects. Some of the example code listings
provided in this book are already sophisticated programming packages in quantitative finance that
you can use directly in your own real-world business applications.
 Many classes in the sample code listings that you will find useful in your quant development. These
classes include charting libraries, various quantitative analysis models, pricing engines for options
and fixed income instruments, machine learning for trading strategy development and back-testing,
 Introduction | xv

and the other useful utility classes. You can extract these classes and plug them into your own
business applications.

Is This Book for You?

You do not have to be an experienced quant developer/analyst or .NET developer to use this book. I
designed this book to be useful to people of all levels of .NET programming experience and financial
background. In fact, I believe that if you have some prior experience with quantitative analysis/
development and programming language C++, Java, R, Python, VBA, C#, or Windows Forms, you will
be able to sit down in front of your computer, start up Microsoft Visual Studio Community 2013, follow
the examples provided in this book, and quickly become proficient with quantitative application
development. For those of you who are already experienced quant analyst/developer or .NET
programmers, I believe this book has much to offer as well. A great deal of the information in this book
about .NET programming in quantitative finance is not available in other tutorial and reference books.
In addition, you can use most of the example programs in this book directly in your own real-world
application development. This book will provide you with a level of detail, explanation, instruction, and
sample program code that will enable you to do just about anything related to quantitative finance
application development using C# and WPF.
Perhaps you are a scientist, an engineer, a mathematician, or a student, rather than a professional quant
developer/analyst or .NET programmer; nevertheless, this book is still a good bet for you. In fact, my
own background is in theoretical physics, a field involving extensive physical modeling, numerical
calculations, and graphical representations of calculated data. I devoted my effort to this field for many
years, starting from undergraduate up to PhD. My first computer experience was with Fortran. Later on,
I had programming experience with Basic, C, C++, R, Python, and Matlab. I always tried to find an ideal
development tool that would allow me not only to generate data easily (computation capability) but also
to represent data graphically (graphics and chart power). The C# and Microsoft Visual Studio .NET
development environment made it possible to develop such integrated applications. Ever since
Microsoft .NET 1.0 came out, I have been in love with the C# language, and able to use this tool
successfully to create powerful business applications for quantitative analysis.
Quant analysts/developers, individual quant traders, and .NET developers can use the majority of the
example programs in this book routinely. Throughout the book, I emphasize the usefulness of .NET
programming to real-world quantitative finance applications. If you follow the instructions presented in
this book closely, you will easily be able to develop various practical business applications in
quantitative finance, from linear analysis, machine learning to pricing engines, and trading strategy
development. At the same time, I will not spend too much time discussing the programming style,
execution speed, and code optimization, because a plethora of books out there already deals with these
topics. Most of the example programs you will find in this book omit error handlings, which makes the
code easier to understand by focusing only on the key concepts and practical applications.

What Do You Need to Use This Book?

You will need no special equipment to make the best use of this book and understand the algorithms. To
run and modify the sample programs, you will need a computer capable of running either Windows 7,
8, or 10. The software installed on your computer should include Visual Studio 2013 (Community
version is fine), the .NET 4.5 standard edition or higher, and SQL Server Express 2012 or higher. If you
have Visual Studio 2012, .NET 4.0, and SQL Server Express 2008 or older versions, you can also run
xvi | Introduction

most of the sample code with few modifications. Please remember, however, that this book is intended
for Visual Studio 2013, .NET 4.5, and SQL Server Express 2014, and that all of the example programs
were created and tested on this platform, so it is best to run the sample code on the same platform.

How the Book Is Organized

This book is organized into eleven chapters, each of which covers a different topic about quantitative
finance applications using C# and WPF. The following summaries of each chapter should give you an
overview of the book’s content:
Chapter 1, Overview of C# and WPF Programming
This chapter introduces the basics of WPF and reviews some of the general aspects of WPF programming,
including XAML files used to define user interfaces.
Chapter 2, Introduction to MVVM
This chapter introduces processes for implementing the MVVM pattern in WPF applications; including
data binding with the property-changed notifications, command binding, and observable collections. It
also reviews some free open-source MVVM tool kits, and shows why we use Caliburn.Micro in this
book.
Chapter 3, Database
This chapter introduces the SQL Server Data Tool (SSDT) and LocalDB, which are built-in features and
shipped as part of the core product of Visual Studio 2013. It shows you how to create simple database
and how to interact with the data. It also reviews ADO.NET Entity Framework that allows developers
without extensive knowledge about SQL to interrogate the database, create complex queries, and
generate classes with the help of a user-friendly interface.
Chapter 4, Market Data
This chapter contains the step-by-step procedures on how to interact with market data providers’ API
and retrieve the free market data from online data source. These market data include the end of the day
(EOD) stock data, intraday data, interest rate data, foreign exchange rate data, and option chain data. It
also discusses how to use the Bloomberg terminal’s API to interact with market data.
Chapter 5, Data Visualization
Data visualization plays a critical role in quantitative finance and trading. Quant analysts and traders
need to monitor the real-time changes in market and trading signals visually on their screen. In this
chapter, I will show you how to use a chart control library I created to display the market data. I will
also discuss how to convert the Windows Forms version of the MSChart control into a WPF and MVVM
compatible user control and how to use this control in developing quantitative finance applications.
Chapter 6, Linear Analysis
This chapter presents the most fundamental analysis approach in quantitative finance based on linear
analysis. I will discuss how to develop different business applications using the linear regression,
principal component analysis (PCA), and correlation.
Chapter 7, Technical Indicators
This chapter discusses various technical indicators, which are often used in quantitative analysis. A
technical indicator is just a mathematical calculation based on historic market data, which is used to
 Introduction | xvii

predict market direction. I will show you how to use the FinancialFormula object in the MSChart control
to display different indicators on your screen and how to extract the output results from the indicators.
Chapter 8, Machine Learning
This chapter discusses the advanced quantitative analysis techniques: machine learning. Machine-
learning technique has become one of the most promising fields in quantitative finance. It is widely used
in quantitative finance for predicting the future stock prices. This chapter will concentrate on the
supervised learning and covers several commonly used machine-learning algorithms in finance,
including the K-nearest neighbors, support vector machines, and neural networks.
Chapter 9, Options Pricing
This chapter covers the Black-Scholes formula used for options pricing. It shows several different
implementations for calculating the price and Greeks of the European and American options. It also
discusses how to use the open source quant libraries, such as QuantLib, to price various options,
including barrier options, Bermudan options, and other exotic options.
Chapter 10, Pricing Fixed-Income Instruments
This chapter demonstrates how to price the fixed-income instruments, including interest rates, bonds,
and credit default swaps. It also discusses various related topics, such as cash flows, term structures,
yield curves, discount factors, and zero-coupon bonds. I will provide the detailed procedures on how to
use the open-source QuantLib library to price these complex financial instruments.
Chapter 11, Trading Strategies and Backtesting
This chapter presents several trading strategies using the simple quantitative analysis techniques,
including the moving average and linear regression, as well as the commonly used technical indicators.
I will also present a long-short based backtesting framework, which allows you to examine the historical
performance of your trading strategies for single stock trading and stock pairs trading.

Structure of Sample Projects

In this book, I will use example code projects to illustrate the detailed implementations for various
business applications in quantitative finance. The following figure show how the sample projects are
structured.
From the left panel, you can see that this book contains eleven chapters. You can click the chapter button
to access the sample projects in the corresponding chapter. Here, I have clicked the “Chapter 1” button
and its background (black) and foreground (white) change colors, indicating the Chapter 1 is selected.
At the same time, the TabControl on the right panel will show all of the available sample projects in
Chapter 1 accordingly. You can then access the different projects in Chapter 1 by clicking different tabs.
This way, you can access whatever sample project you like.
 xviii | Introduction

Using Code Examples

You may use the code in this book in your own applications and documentation. You do not need to
contact the author for permission unless you are reproducing a significant portion of the code. For
example, writing a program that uses several chunks of code from this book does not require permission.
Selling or distributing the example code listings does require permission. Incorporating a significant
amount of example code from this book into your applications and documentation also requires
permission. Integrating the example code from this book into commercial products is not allowed
without written permission of the author.

Customer Support
I am always interested in hearing from readers, and enjoy learning of your thoughts on this book. You
can send me comments by e-mail to jxu@DrXuDotNet.com. I also provide updates, bug fixes, and
ongoing support via my website:
www.DrXuDotNet.com
You can also obtain the complete source code for all of examples in this book from the foregoing website.

View publication stats