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Carlos Oliveira

Practical C++20 Financial Programming

Problem Solving for Quantitative Finance, Financial
Engineering, Business, and Economics
2nd ed.
Carlos Oliveira
Seattle, WA, USA

Any source code or other supplementary material referenced by the

author in this book is available to readers on GitHub via the book’s
product page, located at www.​apress.​com/​9781484268339 and on
coliveira.net/. For more detailed information, please visit http://​www.​
apress.​com/​source-code.

ISBN 978-1-4842-6833-9 e-ISBN 978-1-4842-6834-6

https://doi.org/10.1007/978-1-4842-6834-6

© Carlos Oliveira 2021

This work is subject to copyright. All rights are reserved by the

Publisher, whether the whole or part of the material is concerned,
specifically the rights of translation, reprinting, reuse of illustrations,
recitation, broadcasting, reproduction on microfilms or in any other
physical way, and transmission or information storage and retrieval,
electronic adaptation, computer software, or by similar or dissimilar
methodology now known or hereafter developed.

The use of general descriptive names, registered names, trademarks,

service marks, etc. in this publication does not imply, even in the
absence of a specific statement, that such names are exempt from the
relevant protective laws and regulations and therefore free for general
use.

The publisher, the authors and the editors are safe to assume that the
advice and information in this book are believed to be true and accurate
at the date of publication. Neither the publisher nor the authors or the
editors give a warranty, expressed or implied, with respect to the
material contained herein or for any errors or omissions that may have
been made. The publisher remains neutral with regard to jurisdictional
claims in published maps and institutional affiliations.

Distributed to the book trade worldwide by Apress Media, LLC, 1 New

York Plaza, New York, NY 10004, U.S.A. Phone 1-800-SPRINGER, fax
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(SSBM Finance Inc). SSBM Finance Inc is a Delaware corporation.
To my family, my real source of inspiration.
Introduction
This is a hands-on book for programmers who want to learn about how
C++20 is used in the financial industry. The book concentrates on the
parts of the language that are more frequently used to write financial
software, including the STL (standard template library), templates, and
support for numerical libraries. I also describe many of the important
problems in financial engineering that are part of the day-to-day work
of financial programmers and quantitative analysts in investment banks
and hedge funds.
The book provides how-to examples that cover all the major tools
and concepts used to build working solutions for financial applications.
Each chapter teaches readers how to use advanced C++ concepts as
well as the basic building libraries used by modern C++ developers,
such as the STL and Boost. I discuss how to create correct and efficient
applications, leveraging knowledge of object-oriented and template-
based programming. I assume only a basic knowledge of C and C++ and
build on these concepts to explain techniques already mastered by
developers who are familiar with modern C++.
In the process of writing this book, I was concerned with providing
a great value for readers who are trying to use their programming
knowledge to become proficient in the style of programming used in
financial institutions such as banks, hedge funds, and other companies
in the financial industry. However, I have introduced the topics covered
in the book in a logical and structured way, so that even novice
programmers will be able to absorb the most important topics and
competencies necessary to develop financial applications in C++.
An important feature of the book is its focus on specific themes and
practical solutions for financial problems. While the emphasis is not on
the theoretical aspects of finance, I do discuss topics such as numerical
algorithms, integration techniques, and differential equations for
derivative valuation. Moreover, the reader will gain a good
understanding of how to model such problems using modern C++
concepts.
The financial literature for programmers typically has a large
number of books written from an academic standpoint, with most of
the time spent on the discussion of mathematics concepts behind
algorithms, rather than the software engineering challenges that
developers need to overcome. Therefore, in this book, I decided to focus
on working solutions for common programming problems, in the form
of code examples, offering readers much more value for their reading
efforts.

Audience
This book is intended for readers who already have a working
knowledge of programming in C, C++, or another mainstream language.
These are usually professionals or advanced students in computer
science, engineering, physics, and mathematics, who have an interest in
learning C++20 financial programming either for personal
improvement or for professional reasons. The book is also directed at
practitioners of C++ programming in financial institutions, who would
use the book as a ready-to-use reference for common development
problems.
By reading this book, you will learn how to use modern C++20
techniques to implement practical applications. Being a multi-paradigm
language, C++ is used slightly differently in each application area.
Therefore, skills that are valuable for developing desktop applications
are not necessarily the same as those used to write high-performance
software. A large part of major high-performance financial applications
are written in C++, which means that programmers who want to enter
this lucrative market need to acquire a working knowledge of a few
specific and relevant parts of the language. This book therefore would
be an excellent choice for developers who want to advance their
knowledge effectively while learning one of the most sought-after and
marketable skill sets for modern applications and high-performance
software development.

Content Overview
Here is a brief overview of the contents of each chapter.
Chapter 1 —The Fixed Income Market: The fixed income market
is a large part of the financial engineering industry, and it presents
unique computational challenges for its practitioners. C++
programming is widely used in this area, offering the ability to compute
rates and cash flow variations with incredible speed, as readers will
learn in this chapter. I present C++ coding examples that can be used in
the solution of some of the most common problems occurring in fixed
income markets. I include C++ algorithms for topics such as (1) interest
rate calculation, (2) present value computation, (3) cash flows, and (4)
valuation of bonds.
Chapter 2 —The Equities Market: Equity markets are multifaceted
and offer a great variety of investment vehicles. As a result, the number
and complexity of computational techniques used for financial analysis
of equity markets continue to grow. In this chapter, I present C++
examples for a few selected problems occurring in the equities markets
and their derivatives. I cover programming topics such as the following:
(1) moving average computation, (2) calculating volatility, (3)
computing instrument correlation, and (3) calculating fundamental
indicators.
Chapter 3 —C++ Programming Techniques in Finance: The C++
language was created as an extension of C, which means that most
programs written in C are also valid C++ programs. However, good C++
programs need to make use of high-level features made available by the
language to control program complexity. This is especially important
for financial applications, where we want to create fast and expressive
applications. In this chapter, I explore fundamental techniques that
financial C++ programmers use to write better code with less effort,
including (1) class templates, (2) auto pointers, (3) shared pointers, (4)
resource acquisition is initialization (RAII), (5) automatic type
detection, (6) exception handling, and (7) operator overloading.
Chapter 4 —Common Libraries for Financial Applications:
Modern coding in C++ uses libraries that simplify the creation of fast,
standard-conforming classes. The STL offers a set of generic, standard
containers that can be used in almost any situation. Knowing how to
use the STL well is one of the main skills necessary for effective C++
programming. Another common set of classes is contained in the Boost
libraries, which are usually the basis for the next version of the C++
standard. Readers will learn about topics such as (1) STL containers,
(2) STL algorithms, (3) boost libraries, and (4) date and time handling.
 Chapter 5 —Designing Numerical Classes: At the heart of
financial applications is a set of well-designed numerical classes. This
chapter tells you how to create numerical classes that will perform
efficiently when used in production code. You will also see examples in
C++ that show how to integrate with existing numerical classes and
algorithms. You will learn how to (1) implement a matrix class, (2)
perform calculations at compilation time with templates, (3) represent
ratios with C++ templates, and (4) generate statistical data.
Chapter 6 —Plotting Financial Data: A common activity in
financial programming is the generation of data that needs to be
visualized by traders or other financial stakeholders. Most of the time,
the data needs to be plotted in the form of a chart for easy visualization.
I give a few examples that show how to plot data in C++ programs using
common libraries. You will learn about topics such as (1) using Gnuplot
to plot data, (2) designing a class to create Gnuplot charts, and (3)
plotting from a GUI (graphical user interface) application using Qt.
Chapter 7 —Linear Algebra: Linear algebra (LA) techniques are
used throughout the area of financial engineering. Therefore, it is
important to understand how the traditional methods of LA can be
applied in C++. With this goal in mind, I present a few examples that
show how to use some of the most common LA algorithms. In this
chapter, you will also learn about (1) integrating existing LA libraries
into your code, (2) basic LA operations, (3) the BLAS (basic linear
algebra subprograms) library, and (4) calculating the determinant of a
matrix with BLAS.
Chapter 8 —Interpolation: Interpolation is a commonly used
technique that finds a mathematical function approximating a set of
points. Fast interpolation is the secret for high-performance algorithms
in several areas of financial engineering. This chapter will show you
programming samples that cover a few of the most common
interpolation methods, with efficient implementation in C++. The main
techniques discussed in this chapter are (1) linear interpolation and (2)
polynomial interpolation.
Chapter 9 —Calculating Roots of Equations: Equations are one of
the building blocks of algorithms in financial engineering, and it is
important to be able to calculate equation roots efficiently. In this
chapter, you will find algorithms for different methods of calculating
equation roots, along with explanations of how they work and when
they should be used. Topics include (1) the bisection method, (2) the
secant method, and (3) Newton’s method.
Chapter 10 —Numerical Integration: Function integration is a
common part of many financial algorithms. However, it is hard to solve
certain classes of equations exactly, and numerical methods need to be
employed in such cases. In this chapter, you will see examples of C++
code that can be readily applied to common integration problems. I also
discuss the performance and the accuracy of such methods. The
programming examples in this chapter cover topics such as (1) the
midpoint method, (2) the trapezoid method, and (3) Simpson’s method.
Chapter 11 —Solving ODEs and PDEs: Differential equations are
at the heart of many techniques used in the analysis of equity markets.
There are several processes for solving and analyzing ordinary
differential equations (ODE) and partial differential equations (PDE)
that can be implemented in C++. In this chapter, I present programming
examples that cover aspects of ODEs and PDE modeling and application
in C++. Topics covered include the following: (1) solving ODEs, (2)
using the Runge-Kutta method, and (3) solving the Black-Scholes
equation.
Chapter 12 —Optimization: Optimization refers to a set of
techniques used to find the minimum or maximum of a function.
Optimization strategies are used in several areas of financial
engineering. In this chapter, I discuss programming techniques that can
be used to implement common aspects of optimization algorithms. I
provide a concise explanation of some techniques and how they are
typically implemented in C++20. You will learn about (1) modeling
optimization problems, (2) interfacing with linear programming (LP)
solvers, (3) solving two-dimensional LP problems, and (4) mixed
integer–programming models.
Chapter 13 —Asset and Portfolio Optimization: Portfolio
managers have to face the issue of balancing a portfolio for optimal
performance, depending on their predefined portfolio goals.
Optimization-based techniques have been developed to deal with some
of the most common portfolio construction problems. In this chapter,
we consider algorithms for portfolio optimization using C++. We
consider how to design such optimization code in order to get results
that are as fast and as accurate as possible. Topics include (1) creating a
portfolio model, (2) performing resource allocation, and (3) using
linear techniques for portfolio optimization.
Chapter 14 —Monte Carlo Methods: Among other programming
techniques used in equity markets analysis, Monte Carlo simulation has
a special place due to its wide applicability and easy implementation.
These methods can be used to forecast prices or to validate buying
strategies, for example. In this chapter, I provide programming
examples that can be used as part of simulation-based algorithms, with
topics such as (1) random number generation, (2) optimization through
Monte Carlo methods, and (3) simulation models for price forecasting.
Chapter 15 —Extending Financial Libraries: C++ is a complete
language that can be used to develop the most complex software.
However, it is sometimes beneficial to combine C++ libraries with
scripting languages that can simplify the creation of prototypes and
other noncritical applications. In this chapter, I show you how to use
the solutions and algorithms discussed in the text as external libraries
for scripting languages that are commonly employed in the financial
industry. In particular, you will learn how to (1) extend C++ with
Python and (2) extend C++ with Lua scripts.
Chapter 16 —Using C++ Code with R and Maxima: Financial
algorithms in C++ can be used not only as part of executable code but
also as part of other modeling and development environments. In this
chapter, I show you how to integrate financial libraries into two well-
known simulation and modeling environments for financial analysis: R
and Maxima. You will see how it is possible to create loadable modules
for these environments, incorporating complex C++ algorithms in a way
that they are ready to use from scripts written in R and Maxima.
Chapter 17 —Multithreading: Financial applications have very
stringent performance requirements. A common way to improve
response time is to use concurrency and parallel programming
techniques, such as multithreading. C++ can be used to write very
responsive multithreaded applications, and in this chapter, I explore
algorithms for creating and managing threads, with applications to
financial problems. I also cover the important topic of data access
synchronization. Topics include (1) creating threads, (2) protecting
shared memory, (3) synchronization techniques, and (4) threads using
the standard library.
Appendix A—C++20 Features: C++ is an evolving language, and in
the last few years, we have seen a renewed effort to bring much-needed
updates. The latest efforts are the C++17 and C++20 standards, and
major C++ compilers are incorporating these features at a fast pace. In
the appendix, I cover examples that show how some of these features
can improve your code and simplify the development of new programs
and libraries. You will learn about new features such as (1) auto
variables, (2) closures, (3) rvalues, (4) const expressions, and (5)
initializer lists.

Introduction to the Second Edition

In this second edition of the book, the examples and the text have been
revised to conform to the latest C++ standard, C++20. While much of
our examples continue to compile and work properly in the new
standard, we felt the need to present new C++ features that will make it
easier to develop financial applications.
For example, the appendix now presents some new features only
available in C++20. We also explain how to use threads in the standard
library, among other improvements. All examples have been tested to
make sure that we conform to the latest standard.

Compiling the Code Samples

The examples given in this book have all been tested on Windows using
the MingW gcc compiler and on Mac OS X using the Xcode 12 IDE. You
should be able to build the code, however, using any standards-
compliant C++ compiler that implements the C++20 standard. For
example, gcc is available on Linux and other platforms, and Microsoft
Visual Studio will also work on Windows.
If you use Mac OS X and don’t have Xcode installed in your
computer, you can download it for free from Apple’s developer website
at http://developer.apple.com . The code can also be compiled
from the command line, as it is explained in each chapter.
 If you instead want to use MingW on Windows, you can download it
from the website www.mingw.org .
Once MingW is installed, start the command prompt from the
MingW program group in the start menu. Then, you can type gcc to
check that the compiler is properly installed.
To download the complete set of examples, visit the web page for
this book at http://coliveira.net , or navigate to
apress.com/9781484268339 and click the Download Source
Code button.
Table of Contents
Chapter 1:​The Fixed Income Market
Fixed Income Overview
Why Use C++
Calculating Simple Interest Rates
Problem
Solution
How It Works
Complete Code
Sample Use
Compound Interest
Problem
Solution
How It Works
Complete Code
Sample Use
Modeling Cash Flows
Problem
Solution
Complete Code
Running the Code
Modeling Bonds
Problem
Solution
Complete Code
Running the Code
 Further Reference
Conclusion
Chapter 2:​The Equities Market
Equities Market Concepts
Market Participants
Moving Average Calculation
Problem
Solution
Complete Code
Running the Code
Calculating Volatility
Problem
Solution
Complete Code
Running the Code
Computing Instrument Correlation
Problem
Solution
Complete Code
Running the Code
Calculating Fundamental Indicators
Problem
Solution
Complete Code
Running the Code
Conclusion
Chapter 3:​C++ Programming Techniques in Finance
Calculating Interest Rates for Investment Instruments
Solution
Complete Code
Running the Code
Creating Financial Statement Objects
Solution
Smart Pointers
Using Unique Pointers
Complete Code
Transferring Ownership
Pitfalls of Unique Pointers
Determining Credit Ratings
Solution
Using Shared Pointers
Complete Code
Using the auto Keyword
Collecting Transaction Data
Solution
Exception Handling
Complete Code
Implementing Vector Operations
Solution
Operator Overloading
Complete Code
Conclusion
Chapter 4:​Common Libraries for Financial Applications
Handling Analyst Recommendations
Solution
More About STL Vectors and Maps
Complete Code
Performing Time-Series Transformations
Solution
Using STL Algorithms
Complete Code
Running the Code
Copying Transaction Files
Solution
Boost Libraries
Complete Code
Running the Code
Handling Dates
Solution
Complete Code
Running the Code
Conclusion
Chapter 5:​Designing Numerical Classes
Representing Matrices in C++
Solution
Complete Code
Using Templates to Calculate Factorials
Solution
 Complete Code
Running the Code
Using C++20 Features to Compute Factorial
Representing Calmar Ratios at Compile Time
Solution
Representing Calmar Ratios
Complete Code
Running the Code
Generating Statistical Data
Solution
Probability Distributions
Complete Code
Running the Code
Conclusion
Chapter 6:​Plotting Financial Data
Plotting with Gnuplot
Solution
Complete Code
Running the Code
Plotting Data from a GUI
Solution
Complete Code
Running the Code
Conclusion
Chapter 7:​Linear Algebra
Using Basic Linear Algebra Operations
 Solution
Complete Code
Using Matrix-Oriented Operations
Solution
Complete Code
Running the Application
Calculating the Determinant of a Matrix
Solution
Complete Code
Conclusion
Chapter 8:​Interpolation
Linear Interpolation
Solution
Complete Code
Running the Code
Polynomial Interpolation
Solution
Complete Code
Running the Code
Conclusion
Chapter 9:​Calculating Roots of Equations
Bisection Method
Solution
Complete Code
Running the Code
The Secant Method
 Solution
Complete Code
Running the Code
Newton’s Method
Solution
Complete Code
Running the Code
Conclusion
Chapter 10:​Numerical Integration
The Midpoint Method
Solution
Complete Code
Running the Code
Trapezoid Method
Solution
Complete Code
Running the Code
Using Simpson’s Method
Solution
Complete Code
Running the Code
Conclusion
Chapter 11:​Solving ODEs and PDEs
Solving Ordinary Differential Equations
Solution
Euler’s Method
 Complete Code
Running the Code
Runge-Kutta Method for Solving ODEs
Solution
Complete Code
Running the Code
Solving the Black-Scholes Equation
Solution
Complete Code
Running the Code
Conclusion
Chapter 12:​Optimization
Interfacing with a Linear Programming Solver
Solution
Linear Programming Concepts
Using LP Solver Libraries
Complete Code
Running the Code
Solving Two-Dimensional Investment Problems
Solution
Complete Code
Running the Code
Creating Mixed-Integer Programming Models
Solution
Complete Code
Running the Code
 Conclusion
Chapter 13:​Asset and Portfolio Optimization
Financial Resource Allocation
Solution
Implementation
Complete Code
Running the Code
Portfolio Optimization
Solution
Complete Code
Running the Code
Extensions to Modified CAP
Solution
Complete Code
Running the Code
Conclusion
Chapter 14:​Monte Carlo Methods
Monte Carlo-Based Integral Computation
Solution
Complete Code
Running the Code
Simulating Asset Prices
Solution
Complete Code
Running the Code
Calculating Option Probabilities
 Solution
Determining Profit Probabilities
Complete Code
Running the Code
Conclusion
Chapter 15:​Extending Financial Libraries
Exporting C++ Stock Handling Code to Python
Solution
Complete Code
Running the Code
Exporting C++ Classes Directly to Python
Solution
Complete Code
Running the Code
Using Lua as an Extension Language
Solution
Complete Code
Running the Code
Conclusion
Chapter 16:​Using C++ with R and Maxima
Integrating C++ with R
Solution
Complete Code
Running the Code
Integrating with the Maxima CAS
Solution
 Complete Code
Running the Code
Conclusion
Chapter 17:​Multithreading
Creating Threads with the Pthreads Library
Solution
Complete Code
Running the Code
Calculating Options Probabilities in Parallel
Solution
Complete Code
Running the Code
Using Mutexes to Prevent Unsynchronized Access
Solution
Complete Code
Running the Code
Creating Threads Using the Standard Library
Conclusion
Appendix A:​Features of C++20
Automatic Type Detection
Lambdas
User-Defined Literals
Range-Based for
Rvalue References
New Function Declarator Syntax and decltype
Delegating Constructors
Inheriting Constructors
Generalized Attributes
Generalized Constant Expressions
Null Pointer Constant
Defaulted and Deleted Member Functions
Initializer Lists
Index
About the Author
Carlos Oliveira
works in the area of optimization and
quantitative finance, with more than 15
years of experience in creating scientific
and financial models in C++. During his
career, Carlos has developed several
large-scale applications for financial
companies such as Bloomberg L.P. and
Incapital LLC. Carlos obtained a PhD in
Operations Research and Systems
Engineering from the University of
Florida, an MSc in Computer Science
from UFC (Brazil), and a BSc in
Computer Science from UECE (Brazil).
He also performs academic research in
the field of combinatorial optimization,
with applications in diverse areas such as finance, telecommunications,
computational biology, transportation, and logistics. Carlos has written
more than 30 academic papers on optimization and authored four
books, including Options and Derivatives Programming in C++20:
Algorithms and Programming Techniques for the Financial Industry,
Second Edition (Apress, 2020).
© Carlos Oliveira 2021
C. Oliveira, Practical C++20 Financial Programming
https://doi.org/10.1007/978-1-4842-6834-6_1

1. The Fixed Income Market

Carlos Oliveira1
(1) Seattle, WA, USA

The fixed income market is a large part of the financial industry, and it presents
unique challenges and opportunities for its practitioners. A large amount of the
money managed by pension funds and other institutional funds is allocated to
fixed income investments. Because fixed income has a predictable income stream,
conservative money managers view it as a safer investment option when
compared to stocks and more exotic derivatives. As a result, traditional
institutions commit a lot of time and effort to the fixed income industry.
As software engineers, our main goal when working in the fixed income
market is to define computational strategies and solve problems so that our
clients can be successful. C++ is a language that is uniquely poised to the solution
of problems in this industry. This is due to its flexibility and high performance on
standard computational platforms. Moreover, C++ is a highly portable language
that can be used in a variety of computer systems.
As a result of the advantages just mentioned, C++ programing has been widely
used in this area of finance, and it is one of the preferred languages used in banks,
hedge funds, pension funds, and other large institutions that have to deal with
fixed income as one of their main investment vehicles. Programmers who work
with C++ have over the years developed software that offers useful capabilities for
fixed income analysis, such as computing prevailing interest rates and
determining cash flow valuations. All of these features need to execute with
incredible speed, with the help of some of the techniques explored in later
sections of this book. Due to its new standard, C++20, the language is nowadays
even more capable of satisfying the strict requirements demanded by the financial
industry.
In this chapter, I provide a quick introduction to this area of finance and show
you a few C++ coding examples that can be used in the solution of some of the
most common programming problems occurring in fixed income markets. These
coding examples include the solution to problems involving
Simple interest rate calculation
 Compound interest rate calculation
Cash flow modeling
Determination of the present value of cash flows
Modeling and valuation of bonds
In the remainder of this chapter, I will also show you why C++20 may be the
ideal language to deal with programming problems occurring in the financial
investment industry and in particular how to solve problems in fixed income
investing. Then, I will provide a general introduction to the issues occurring in
fixed income investments and an overview of how the fixed income market works.
Then, I will start with a few programming examples that explore the concepts
discussed in the previous sections.

Fixed Income Overview

We start our discussion with a general overview of fixed income instruments.
While this is not a book on finance or economics, it is still important to have a few
concepts in place. My general goal is to describe how to use these concepts in the
solution of the practical computational problems that we discuss in the latter part
of this chapter.
In a fixed income investment, a contractually defined exchange occurs between
two parties. Both parties agree to exchange cash flows that are assigned based on
interest rates and the time of cash exchanges. Fixed income investments are very
diverse, but they include the following well-known types of investments vehicles:
Money market funds: These are short-term investments that offer a small
rate of return but at the same time provide easy availability of funds at your
own convenience. Money market funds have a very short-term horizon, and
they only pay returns that are close to the spot rate practiced by banks. Since
money market funds have a small return that is hard to predict over a long
period, they are used mostly for their liquidity.
Bonds: This is a major category of fixed income applications. Bonds pay a
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Here are some of the most important concepts about fixed income investments
used through this chapter.
Interest rate: The return of investment in percentage points for a given period
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that is determined as a contractual obligation.
Principal: The amount of the original fixed income loan or investment. This is
the value over which the interest rate is calculated in the case of a fixed income
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Compound interest: Interest that is accrued over time and added to the
principal as regular interest payments are made at each period. The amount of
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Continuous compounding: As the number of periods increase, the effect of
compound interest becomes more pronounced. For example, compound
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THE END
Cold Spring Harbor, Long Island
June 4, 1925
St. Jean-de-Luz, B. P., France
July 21, 1926
Typographical errors corrected by
the etext transcriber:
lay figure=> clay figure {pg 6}
sarcely giving=> scarcely giving
{pg 205}
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