Description

For graduate courses in business, economics, financial mathematics, and financial engineering; for advanced undergraduate courses with students who have good quantitative skills; and for practitioners involved in derivatives markets

Practitioners refer to it as “the bible;” in the university and college marketplace it’s the best seller; and now it’s been revised and updated to cover the industry’s hottest topics and the most up-to-date material on new regulations. Options, Futures, and Other Derivatives by John C. Hull bridges the gap between theory and practice by providing a current look at the industry, a careful balance of mathematical sophistication, and an outstanding ancillary package that makes it accessible to a wide audience. Through its coverage of important topics such as the securitization and the credit crisis, the overnight indexed swap, the Black-Scholes-Merton formulas, and the way commodity prices are modeled and commodity derivatives valued, it helps students and practitioners alike keep up with the fast pace of change in today’s derivatives markets.

This program provides a better teaching and learning experience—for you and your students. Here’s how:

·    NEW! Available with DerivaGem 3.00 software—including two Excel applications, the Options Calculator and the Applications Builder

·    Bridges the gap between theory and practice—a best-selling college text, and considered “the bible” by practitioners, it provides the latest information in the industry

·    Provides the right balance of mathematical sophistication—careful attention to mathematics and notation

·    Offers outstanding ancillaries toround out the high quality of the teaching and learning package

Features

NEW! Available with DerivaGem 3.00 software—including to Excel applications, the Options Calculator and the Applications Builder, and a Monte Carlo simulation worksheet:

o The Options Calculator consists of easy-to-use software for valuing a wide range of options.

o The Applications Builder consists of a number of Excel functions from which users can build their own applications. It includes a number of sample applications and enables students to explore the properties of options and numerical procedures more easily. It also allows more interesting assignments to be designed.

o The new version of the software includes a worksheet to illustrate the use of Monte Carlo simulation for valuing options.

Bridges the gap between theory and practice—a best-selling college text, and considered “the bible” by practitioners, it provides the latest information in the industry, including:

·    NEW! New material on:

o The industry’s use of the overnight indexed swap (OIS) rates to determine risk-free discount rates;

o The new regulations for over-the-counter derivatives;

o New non-technical explanation of the terms in the Black-Scholes-Merton formulas

o A new chapter early in the book discussing credit risk, discount rates, and funding costs

o Products such as DOOM options and CEBOs offered by CME Group

o Perpetual options and other perpetual derivatives

o Many new end-of-chapter problems 

·    Expanded, updated, or more complete information on:

o Central clearing, margin requirements, and swap execution facilities

o Credit risk and credit derivatives with the key products and key issues being introduced early in the book

o One-factor equilibrium models of the term structure.

Provides the right balance of mathematical sophistication—careful attention to mathematics and notation includes:

·    Nonessential mathematical material has been either eliminated or include in end-of-chapter appendices and in the technical notes on the author’s web site Concepts likely to be new to many readers have been explained carefully, and many numerical examples have been included

Offers outstanding ancillaries to round out the high quality of the teaching and learning package:

o Slides

o Several hundred PowerPoint slides can be downloaded from Pearson's Instructor Resource Center or from the author’s website. Textbook adopters are welcome to adapt the slides to meet their own needs.

o  Instructors Manual

o Available online to adopting instructors by Pearson, it contains solutions to all questions (both Further Questions and Questions and Problems), notes on the teaching of each chapter, test bank questions, notes on course organization, and some relevant Excel worksheets.

o Technical Notes

Technical Notes elaborate on points made in the text. They are referred in the text and can be downloaded from www.pearsonglobaleditions.com/hull. Not including the Technical Notes in the book has helped to streamline the presentation of material so that it is more student friendly.

New to this Edition

NEW! Available DerivaGem 3.00 software—including to Excel applications, the Options Calculator and the Applications Builder, and a Monte Carlo simulation worksheet:

o The Options Calculator consists of easy-to-use software for valuing a wide range of options.

o The Applications Builder consists of a number of Excel functions from which users can build their own applications. It includes a number of sample applications and enables students to explore the properties of options and numerical procedures more easily. It also allows more interesting assignments to be designed.

o The new version of the software includes a worksheet to illustrate the use of Monte Carlo simulation for valuing options.

Bridges the gap between theory and practice—a best-selling college text, and considered “the bible” by practitioners, it provides the latest information in the industry, including:

·    NEW! New material on:

o The industry’s use of the overnight indexed swap (OIS) rates to determine risk-free discount rates;

o The new regulations for over-the-counter derivatives;

o New non-technical explanation of the terms in the Black-Scholes-Merton formulas

o A new chapter early in the book discussing credit risk, discount rates, and funding costs

o Products such as DOOM options and CEBOs offered by CME Group

o Perpetual options and other perpetual derivatives

o Many new end-of-chapter problems 

·    Expanded, updated, or more complete information on:

o Central clearing, margin requirements, and swap execution facilities

o Credit risk and credit derivatives with the key products and key issues being introduced early in the book

o One-factor equilibrium models of the term structure.

Table of Contents

1. Introduction

2. Mechanics of Futures Markets

3. Hedging Strategies Using Futures

4. Interest Rates

5. Determination of Forward and Futures Prices

6.  Interest Rate Futures

7. Swaps

8. Securitization and the Credit Crisis of 2007

9. OIS Discounting, Credit Issues, and Funding Costs

10. Mechanics of Options Markets

11. Properties of Stock Options

12. Trading Strategies Involving Options

13. Binomial Trees

14. Wiener Processes and Ito’s Lemma

15. The Black-Scholes-Merton Model

16. Employee Stock Options

17. Options on Stock Indices and Currencies

18. Options on Futures

19. Greek Letters

20. Volatility Smiles

21. Basic Numerical Procedures

22. Value at Risk

23. Estimating Volatilities and Correlations for Risk Management

24. Credit Risk

25. Credit Derivatives

26. Exotic Options

27. More on Models and Numerical Procedures

28. Martingales and Measures

29. Interest Rate Derivatives: The Standard Market Models

30. Convexity, Timing and Quanto Adjustments

31. Interest Rate Derivatives: Models of the Short Rate

32. HJM, LMM, and Multiple Zero Curves

33. Swaps Revisited

34. Energy and Commodity Derivatives

35. Real Options

36. Derivatives Mishaps and What We Can Learn from Them

Glossary of Terms

DerivaGem Software

Major Exchanges Trading Futures and Options

Table for N(x) when x≤ 0

Table for N(x) when x≥0

Author index

Subject index