By John C. Hull
Descripción: 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:
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NEW! Available with a new version of DerivaGem software—including two Excel applications, the Options Calculator and the Applications Builder
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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
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Provides the right balance of mathematical sophistication—careful attention to mathematics and notation
Offers outstanding ancillaries to round out the high quality of the teaching and learning package
Contenido: Chapter 1.Introduction
1.1 Exchange-traded markets
1.2 Over-the-counter markets
1.3 Forward contracts
1.4 Futures contracts
1.5 Options
1.6 Types of traders
1.7 Hedgers
1.8 Speculators
1.9 Arbitrageurs
1.10 Dangers
Summary
Further reading
Practice questions
Further questions
Chapter 2.Mechanics of futures markets
2.1 Background
2.2 Specification of a futures contract
2.3 Convergence of futures price to spot price
2.4 The operation of margin accounts
2.5 OTC markets
2.6 Market quotes
2.7 Delivery
2.8 Types of traders and types of orders
2.9 Regulation
2.10 Accounting and tax
Summary
Further reading
Practice questions
Further questions
Chapter 3.Hedging strategies using futures
3.1 Basic principles
3.2 Arguments for and against hedging
3.3 Basis risk
3.4 Cross hedging
3.5 Stock index futures
3.6 Stack and roll
Summary
Further reading
Practice questions
Further questions
Appendix: Capital asset pricing model
Chapter 4.Interest rates
4.1 Types of rates
4.2 Measuring interest rates
4.3 Zero rates
4.4 Bond pricing
4.5 Determining Treasury zero rates
4.6 Forward rates
4.7 Forward rate agreements
4.8 Duration
4.9 Convexity
4.10 Theories of the term structure of interest rates
Summary
Further reading
Practice questions
Further questions
Chapter 5.Determination of forward and futures prices
5.1 Investment assets vs. consumption assets
5.2 Short selling
5.3 Assumptions and notation
5.4 Forward price for an investment asset
5.5 Known income
5.6 Known yield
5.7 Valuing forward contracts
5.8 Are forward prices and futures prices equal?
5.9 Futures prices of stock indices
5.10 Forward and futures contracts on currencies
5.11 Futures on commodities
5.12 The cost of carry
5.13 Delivery options
5.14 Futures prices and expected future spot prices
Summary
Further reading
Practice questions
Further questions
Chapter 6.Interest rate futures
6.1 Day count and quotation conventions
6.2 Treasury bond futures
6.3 Eurodollar futures
6.4 Duration-based hedging strategies using futures
6.5 Hedging portfolios of assets and liabilities
Summary
Further reading
Practice questions
Further questions
Chapter 7.Swaps
7.1 Mechanics of interest rate swaps
7.2 Day count issues
7.3 Confirmations
7.4 The comparative-advantage argument
7.5 The nature of swap rates
7.6 Determining LIBOR/swap zero rates
7.7 Valuation of interest rate swaps
7.8 Term structure effects
7.9 Fixed-for-fixed currency swaps
7.10 Valuation of fixed-for-fixed currency swaps
7.11 Other currency swaps
7.12 Credit risk
7.13 Other types of swaps
Summary
Further reading
Practice questions
Further questions
Chapter 8.Securitization and the credit crisis of 2007
8.1 Securitization
8.2 The US housing market
8.3 What went wrong?
8.4 The aftermath
Summary
Further reading
Practice questions
Further questions
Chapter 9.OIS discounting, credit issues, and funding costs
9.1 The risk-free rate
9.2 The OIS rate
9.3 Valuing swaps and FRAs with OIS discounting
9.4 OIS vs. LIBOR: Which is correct?
9.5 Credit risk: CVA and DVA
9.6 Funding costs
Summary
Further reading
Practice questions
Further questions
Chapter 10.Mechanics of options markets
10.1 Types of options
10.2 Option positions
10.3 Underlying assets
10.4 Specification of stock options
10.5 Trading
10.6 Commissions
10.7 Margin requirements
10.8 The options clearing corporation
10.9 Regulation
10.10 Taxation
10.11 Warrants, employee stock options, and convertibles
10.12 Over-the-counter options markets
Summary
Further reading
Practice questions
Further questions
Chapter 11.Properties of stock options
11.1 Factors affecting option prices
11.2 Assumptions and notation
11.3 Upper and lower bounds for option prices
11.4 Put–call parity
11.5 Calls on a non-dividend-paying stock
11.6 Puts on a non-dividend-paying stock
11.7 Effect of dividends
Summary
Further reading
Practice questions
Further questions
Chapter 12.Trading strategies involving options
12.1 Principal-protected notes
12.2 Trading an option and the underlying asset
12.3 Spreads
12.4 Combinations
12.5 Other payoffs
Summary
Further reading
Practice questions
Further questions
Chapter 13.Binomial trees
13.1 A one-step binomial model and a no-arbitrage argument
13.2 Risk-neutral valuation
13.3 Two-step binomial trees
13.4 A put example
13.5 American options
13.6 Delta
13.7 Matching volatility with u and d
13.8 The binomial tree formulas
13.9 Increasing the number of steps
13.10 Using DerivaGem
13.11 Options on other assets
Summary
Further reading
Practice questions
Further questions
Appendix: Derivation of the Black–Scholes–Merton option-pricing formula from a binomial tree
Chapter 14.Wiener processes and Itô’s lemma
14.1 The Markov property
14.2 Continuous-time stochastic processes
14.3 The process for a stock price
14.4 The parameters
14.5 Correlated processes
14.6 Itô’s lemma
14.7 The lognormal property
Summary
Further reading
Practice questions
Further questions
Appendix: Derivation of Itô’s lemma
Chapter 15.The Black–Scholes–Merton model
15.1 Lognormal property of stock prices
15.2 The distribution of the rate of return
15.3 The expected return
15.4 Volatility
15.5 The idea underlying the Black–Scholes–Merton differential equation
15.6 Derivation of the Black–Scholes–Merton differential equation
15.7 Risk-neutral valuation
15.8 Black–Scholes–Merton pricing formulas
15.9 Cumulative normal distribution function
15.10 Warrants and employee stock options
15.11 Implied volatilities
15.12 Dividends
Summary
Further reading
Practice questions
Further questions
Appendix: Proof of Black–Scholes–Merton formula using risk-neutral valuation
Chapter 16.Employee stock options
16.1 Contractual arrangements
16.2 Do options align the interests of shareholders and managers?
16.3 Accounting issues
16.4 Valuation
16.5 Backdating scandals
Summary
Further reading
Practice questions
Further questions
Chapter 17.Options on stock indices and currencies
17.1 Options on stock indices
17.2 Currency options
17.3 Options on stocks paying known dividend yields
17.4 Valuation of European stock index options
17.5 Valuation of European currency options
17.6 American options
Summary
Further reading
Practice questions
Further questions
Chapter 18.Futures options
18.1 Nature of futures options
18.2 Reasons for the popularity of futures options
18.3 European spot and futures options
18.4 Put–call parity
18.5 Bounds for futures options
18.6 Valuation of futures options using binomial trees
18.7 Drift of a futures price in a risk-neutral world
18.8 Black’s model for valuing futures options
18.9 American futures options vs. American spot options
18.10 Futures-style options
Summary
Further reading
Practice questions
Further questions
Chapter 19.The Greek letters
19.1 Illustration
19.2 Naked and covered positions
19.3 A stop-loss strategy
19.4 Delta hedging
19.5 Theta
19.6 Gamma
19.7 Relationship between delta, theta, and gamma
19.8 Vega
19.9 Rho
19.10 The realities of hedging
19.11 Scenario analysis
19.12 Extension of formulas
19.13 Portfolio insurance
19.14 Stock market volatility
Summary
Further reading
Practice questions
Further questions
Appendix: Taylor series expansions and hedge parameters
Chapter 20.Volatility smiles
20.1 Why the volatility smile is the same for calls and puts
20.2 Foreign currency options
20.3 Equity options
20.4 Alternative ways of characterizing the volatility smile
20.5 The volatility term structure and volatility surfaces
20.6 Greek letters
20.7 The role of the model
20.8 When a single large jump is anticipated
Summary
Further reading
Practice questions
Further questions
Appendix: Determining implied risk-neutral distributions from volatility smiles
Chapter 21.Basic numerical procedures
21.1 Binomial trees
21.2 Using the binomial tree for options on indices, currencies, and futures contracts
21.3 Binomial model for a dividend-paying stock
21.4 Alternative procedures for constructing trees
21.5 Time-dependent parameters
21.6 Monte Carlo simulation
21.7 Variance reduction procedures
21.8 Finite difference methods
Summary
Further reading
Practice questions
Further questions
Chapter 22.Value at risk
22.1 The VaR measure
22.2 Historical simulation
22.3 Model-building approach
22.4 The linear model
22.5 The quadratic model
22.6 Monte Carlo simulation
22.7 Comparison of approaches
22.8 Stress testing and back testing
22.9 Principal components analysis
Summary
Further reading
Practice questions
Further questions
Chapter 23.Estimating volatilities and correlations
23.1 Estimating volatility
23.2 The exponentially weighted moving average model
23.3 The GARCH (1,1) model
23.4 Choosing between the models
23.5 Maximum likelihood methods
23.6 Using GARCH (1,1) to forecast future volatility
23.7 Correlations
23.8 Application of EWMA to four-index example
Summary
Further reading
Practice questions
Further questions
Chapter 24.Credit risk
24.1 Credit ratings
24.2 Historical default probabilities
24.3 Recovery rates
24.4 Estimating default probabilities from bond yield spreads
24.5 Comparison of default probability estimates
24.6 Using equity prices to estimate default probabilities
24.7 Credit risk in derivatives transactions
24.8 Default correlation
24.9 Credit VaR
Summary
Further reading
Practice questions
Further questions
Chapter 25.Credit derivatives
25.1 Credit default swaps
25.2 Valuation of credit default swaps
25.3 Credit indices
25.4 The use of ?xed coupons
25.5 CDS forwards and options
25.6 Basket credit default swaps
25.7 Total return swaps
25.8 Collateralized debt obligations
25.9 Role of correlation in a basket CDS and CDO
25.10 Valuation of a synthetic CDO
25.11 Alternatives to the standard market model
Summary
Further reading
Practice questions
Further questions
Chapter 26.Exoticoptions
26.1 Packages
26.2 Perpetual American call and put options
26.3 Nonstandard American options
26.4 Gap options
26.5 Forward start options
26.6 Cliquet options
26.7 Compound options
26.8 Chooser options
26.9 Barrier options
26.10 Binary options
26.11 Lookback options
26.12 Shout options
26.13 Asian options
26.14 Options to exchange one asset for another
26.15 Options involving several assets
26.16 Volatility and variance swaps
26.17 Static options replication
Summary
Further reading
Practice questions
Further questions
Chapter 27.More on models and numerical procedures
27.1 Alternatives to Black–Scholes–Merton
27.2 Stochastic volatility models
27.3 The IVF model
27.4 Convertible bonds
27.5 Path-dependent derivatives
27.6 Barrier options
27.7 Options on two correlated assets
27.8 Monte Carlo simulation and American options
Summary
Further reading
Practice questions
Further questions
Chapter 28.Martingales and measures
28.1 The market price of risk
28.2 Several state variables
28.3 Martingales
28.4 Alternative choices for the numeraire
28.5 Extension to several factors
28.6 Black’s model revisited
28.7 Option to exchange one asset for another
28.8 Change of numeraire
Summary
Further reading
Practice questions
Further questions
Chapter 29.Interest rate derivatives: The standard market models
29.1 Bond options
29.2 Interest rate caps and ?oors
29.3 European swap options
29.4 OIS discounting
29.5 Hedging interest rate derivatives
Summary
Further reading
Practice questions
Further questions
Chapter 30.Convexity, timing, and quanto adjustments
30.1 Convexity adjustments
30.2 Timing adjustments
30.3 Quantos
Summary
Further reading
Practice questions
Further questions
Appendix: Proof of the convexity adjustment formula
Chapter 31.Interest rate derivatives: Models of the short rate
31.1 Background
31.2 Equilibrium models
31.3 No-arbitrage models
31.4 Options on bonds
31.5 Volatility structures
31.6 Interest rate trees
31.7 A general tree-building procedure
31.8 Calibration
31.9 Hedging using a one-factor model
Summary
Further reading
Practice questions
Further questions
Chapter 32.HJM, LMM, and multiple zero curves
32.1 The Heath, Jarrow, and Morton model
32.2 The LIBOR market model
32.3 Handling multiple zero curves
32.4 Agency mortgage-backed securities
Summary
Further reading
Practice questions
Further questions
Chapter 33.Swaps Revisited
33.1 Variations on the vanilla deal
33.2 Compounding swaps
33.3 Currency swaps
33.4 More complex swaps
33.5 Equity swaps
33.6 Swaps with embedded options
33.7 Other swaps
Summary
Further reading
Practice questions
Further questions
Chapter 34.Energy and commodity derivatives
34.1 Agricultural commodities
34.2 Metals
34.3 Energy products
34.4 Modeling commodity prices
34.5 Weather derivatives
34.6 Insurance derivatives
34.7 Pricing weather and insurance derivatives
34.8 How an energy producer can hedge risks
Summary
Further reading
Practice questions
Further questions
Chapter 35.Real options
35.1 Capital investment appraisal
35.2 Extension of the risk-neutral valuation framework
35.3 Estimating the market price of risk
35.4 Application to the valuation of a business
35.5 Evaluating options in an investment opportunity
Summary
Further reading
Practice questions
Further questions
Chapter 36.Derivatives mishaps and what we can learn from them
36.1 Lessons for all users of derivatives
36.2 Lessons for financial institutions
36.3 Lessons for nonfinancial corporations
Summary
Further reading
DerivaGem software
Major exchanges trading futures and options
Tables for N(x)
Author index
Subject index
Material: