Options, Futures and Other Derivatives

ISBN-10: 0130224448
ISBN-13: 9780130224446
Edition: 4th 2000
Authors: John C. Hull
List price: $125.00
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Description: For undergraduate and graduate courses in Options and Futures, Financial Engineering and Risk Management, typically found in business, finance, economics and mathematics departments. Also suitable for practitioners who want to acquire a working  More...

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Book details

List price: $125.00
Edition: 4th
Copyright year: 2000
Publisher: Prentice Hall PTR
Publication date: 7/26/1999
Binding: Hardcover
Pages: 720
Size: 6.25" wide x 9.25" long x 1.50" tall
Weight: 2.508
Language: English

For undergraduate and graduate courses in Options and Futures, Financial Engineering and Risk Management, typically found in business, finance, economics and mathematics departments. Also suitable for practitioners who want to acquire a working knowledge of how derivatives can be analyzed. This best seller represents how academia and real-world practice have come together with a common respect and focus of theory and practice. It provides a unifying approach to the valuation of all derivativesnot just futures and options. It assumes that the reader has taken an introductory course in finance and an introductory course in probability and statistics. No prior knowledge of options, futures contracts, swaps, and so on is assumed.

John C. Hull is the noted author of such texts as Introduction to Futures and Options, Markets and Options, Futures, and Other Derivatives. In these books, and others, he explains in readable form concepts related to the Futures market, investing, and business. Largely aimed at students, Hull's books serve as an excellent introduction to the field or a valuable refresher to those already in the corporate world. John C. Hull has been a professor of finance and director of the Centre for Finance Studies at the University of Toronto in Canada. He received degrees from Cranfield University, Cambridge University, and Lancaster.

Preface
Introduction
Forward Contracts
Futures Contracts
Options
Other Derivatives
Types of Traders
Those Big Losses
Futures Markets and the Use of Futures for Hedging
Trading Futures Contracts
Specification of the Futures Contract
Operation of Margins
Newspaper Quotes
Convergence of Futures Price to Spot Price
Settlement
Regulation
Hedging Using Futures
Optimal Hedge Ratio
Rolling the Hedge Forward
Accounting and Tax
Forward and Futures Prices
Some Preliminaries
The Forward Price for an Investment Asset
The Effect of Known Income
The Effect of a Known Dividend Yield
Value of a Forward Contract
Forward Prices versus Futures Prices
Stock Index Futures
Foreign Currencies
Futures on Commodities
The Cost of Carry
Delivery Options
Futures Prices and the Expected Future Spot Price
Assets Providing Dividend Yields
Proof That Forward and Futures Prices Are Equal When Interest Rates Are Constant
Interest Rates and Duration
Types of Rates
Zero Rates
Bond Pricing
Determining Zero Rates
Forward Rates
Forward-Rate Agreements
Theories of the Term Structure
Day Count Conventions
Quotations
Interest Rate Futures
Treasury Bond Futures
Eurodollar Futures
Duration
Duration-Based Hedging Strategies
Limitations of Duration
Swaps
Mechanics of Interest Rate Swaps
The Comparative Advantage Argument
Valuation of Interest Rate Swaps
Currency Swaps
Valuation of Currency Swaps
Other Swaps
Credit Risk
Construction of Zero-Coupon LIBOR Curve
Options Markets
Underlying Assets
Specification of Stock Options
Newspaper Quotes
Trading
Commissions
Margins
The Options Clearing Corporation
Regulation
Taxation
Warrants, Executive Stock Options, and Convertibles
Properties of Stock Option Prices
Factors Affecting Option Prices
Assumptions and Notation
Upper and Lower Bounds for Option Prices
Put--Call Parity
Early Exercise: Calls on a Non-Dividend-Paying Stock
Early Exercise: Puts on a Non-Dividend-Paying Stock
Relationship Between American Put and Call Prices
The Effect of Dividends
Empirical Research
Trading Strategies Involving Options
Strategies Involving a Single Option and a Stock
Spreads
Combinations
Other Payoffs
Introduction to Binomial Trees
A One-Step Binomial Model
Risk-Neutral Valuation
Two-Step Binomial Trees
A Put Option Example
American Options
Delta
Matching Volatility with u and d
Binomial Trees in Practice
Model of the Behavior of Stock Prices
The Markov Property
Continuous Time Stochastic Processes
The Process for Stock Prices
Review of the Model
The Parameters
Ito's Lemma
Derivation of Ito's Lemma
The Black--Scholes Model
Lognormal Property of Stock Prices
The Distribution of the Rate of Return
Volatility
Concepts Underlying the Black--Scholes--Merton Differential Equation
Derivation of the Black--Scholes--Merton Differential Equation
Risk-Neutral Valuation
Black--Scholes Pricing Formulas
Cumulative Normal Distribution Function
Warrants Issued by a Company on Its Own Stock
Implied Volatilities
The Causes of Volatility
Dividends
Proof of Black--Scholes--Merton Formula
Exact Procedure for Calculating Values of American Calls on Dividend-Paying Stocks
Calculation of Cumulative Probability in Bivariate Normal Distribution
Options on Stock Indices, Currencies, and Futures
Results for a Stock Paying a Continuous Dividend Yield
Option Pricing Formulas
Options on Stock Indices
Currency Options
Futures Options
Valuation of Futures Options Using Binomial Trees
A Futures Price as a Stock Paying a Continuous Dividend Yield
Black's Model for Valuing Futures Options
Comparison of Futures Option and Spot Option Prices
Derivation of Differential Equation Satisfied by a Derivative Dependent on a Stock Providing a Continuous Dividend Yield
Derivation of Differential Equation Satisfied by a Derivative Dependent on a Futures Price
The Greek Letters
Example
Naked and Covered Positions
A Stop-Loss Strategy
Delta Hedging
Theta
Gamma
Relationship among Delta, Theta, and Gamma
Vega
Rho
Hedging in Practice
Scenario Analysis
Portfolio Insurance
Stock Market Volatility
Taylor Series Expansions and Hedge Parameters
Value at Risk
Daily Volatilities
Calculation of VaR in Simple Situations
A Linear Model
How Interest Rates Are Handled
When the Linear Model Can Be Used
A Quadratic Model
Monte Carlo Simulation
Historical Simulation
Stress Testing and Back-Testing
Principal Components Analysis
Use of the Cornish-Fisher Expansion to Estimate VaR
Estimating Volatilities and Correlations
Estimating Volatility
The Exponentially Weighted Moving Average Model
The GARCH (1,1) Model
Choosing Between the Models
Maximum Likelihood Methods
Using GARCH (1,1) to Forecast Future Volatility
Correlations
Numerical Procedures
Binomial Trees
Using the Binomial Tree for Options on Indices, Currencies, and Futures Contracts
Binomial Model for a Dividend-Paying Stock
Extensions of the Basic Tree Approach
Alternative Procedures for Constructing Trees
Monte Carlo Simulation
Variance Reduction Procedures
Finite Difference Methods
Analytic Approximation to American Option Prices
Analytic Approximation to American Option Prices
Volatility Smiles and Alternatives to Black-Scholes
Preliminaries
Foreign Currency Options
Equity Options
The Volatility Term Structure
Volatility Matrices
Relaxing the Assumptions in Black-Scholes
Alternative Models for Stock Options
Pricing Models Involving Jumps
Stochastic Volatility Models
Empirical Research
Pricing Formulas for Alternative Models
Exotic Options
Types of Exotic Options
Path-Dependent Derivatives
Lookback Options
Barrier Options
Options on Two Correlated Assets
Implied Trees
Hedging Issues
Static Options Replication
Calculation of the First Two Moments of Arithmetic Averages and Baskets
Extensions of the Theoretical Framework for Pricing Derivatives: Martingales and Measures
The Market Price of Risk
Derivitives Dependent on Several State Variables
Derivatives Dependent on Commodity Prices
Martingales and Measures
Alternative Choices for the Numeraire
Extension to Multiple Independent Factors
Applications
Change of Numeraire
Quantos
Siegel's Paradox
Generalization of Ito's Lemma
Derivation of the General Differential Equation Satisfied by Derivatives
Interest Rate Derivatives: The Standard Market Models
Black's Model
Bond Options
Interest Rate Caps
European Swap Options
Generalizations
Convexity Adjustments
Timing Adjustments
When Is an Adjustment Necessary?
Accrual Swaps
Spread Options
Hedging Interest Rate Derivatives
Proof of the Convexity Adjustment Formula
Interest Rate Derivatives: Models of the Short Rate
Equilibrium Models
One-Factor Equilibrium Model
The Rendleman and Bartter Model
The Vasicek Model
The Cox, Ingersoll, and Ross Model
Two-Factor Equilibrium Models
No-Arbitrage Models
The Ho and Lee Model
The Hull and White Model
Options on Coupon-Bearing Bonds
Interest Rate Trees
A General Tree-Building Procedure
Nonstationary Models
Calibration
Hedging Using a One-Factor Model
Forward Rates and Futures Rates
Interest Rate Derivatives: More Advanced Models
Two-Factor Models of the Short Rate
The Heath, Jarrow, and Morton Approach
The LIBOR Market Model
Mortgage-Backed Securities
The A(t, T), [sigma][rho] and [thetas](t) Functions in the Two-Factor Hull-White Model
Credit Risk
The Probability of Default and Expected Losses
Adjusting the Prices of Derivatives to Reflect Counterparty Default Risk
Credit Value at Risk
Credit Derivatives
Valuation of Convertible Bonds
Manipulation of the Matrices of Credit Rating Changes
Glossary of Notation
Glossary of Terms
DerivaGem Software
Major Exchanges Trading Futures and Options
Table for N(x) when x [less than or equal] 0
Table for N(x) when x [greater than or equal] 0
Author Index
Subject Index

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