Book , Print in English

Options, futures, and other derivatives

John C. Hull, University of Toronto.
  • Boston : Pearson, [2015]
  • Ninth edition.
  • xxi, 869 pages : illustrations ; 26 cm
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Subjects
Contents
  • ch. 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
  • ch. 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. 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
  • 2.11. Forward vs. futures contracts
  • Summary
  • Further reading
  • Practice questions
  • Further questions
  • ch. 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
  • ch. 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
  • ch. 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. cost of carry
  • 5.13. Delivery options
  • 5.14. Futures prices and expected future spot prices
  • Summary
  • Further reading
  • Practice questions
  • Further questions
  • ch. 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
  • ch. 7 Swaps
  • 7.1. Mechanics of interest rate swaps
  • 7.2. Day count issues
  • 7.3. Confirmations
  • 7.4. comparative-advantage argument
  • 7.5. nature of swap rates
  • 7.6. Determining the 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
  • ch. 8 Securitization and the credit crisis of 2007
  • 8.1. Securitization
  • 8.2. US housing market
  • 8.3. What went wrong?
  • 8.4. aftermath
  • Summary
  • Further reading
  • Practice questions
  • Further questions
  • ch. 9 OIS discounting, credit issues, and funding costs
  • 9.1. risk-free rate
  • 9.2. 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
  • ch. 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. 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
  • ch. 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
  • ch. 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
  • ch. 13 Binomial trees
  • 13.1. one-step binomial model and a no-arbitrage argument
  • 13.2. Risk-neutral valuation
  • 13.3. Two-step binomial trees
  • 13.4. put example
  • 13.5. American options
  • 13.6. Delta
  • 13.7. Matching volatility with u and d
  • 13.8. 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
  • ch. 14 Wiener processes and Ito's lemma
  • 14.1. Markov property
  • 14.2. Continuous-time stochastic processes
  • 14.3. process for a stock price
  • 14.4. parameters
  • 14.5. Correlated processes
  • 14.6. Ito's lemma
  • 14.7. lognormal property
  • Summary
  • Further reading
  • Practice questions
  • Further questions
  • Appendix: Derivation of Ito's lemma
  • ch. 15 Black--Scholes--Merton model
  • 15.1. Lognormal property of stock prices
  • 15.2. distribution of the rate of return
  • 15.3. expected return
  • 15.4. Volatility
  • 15.5. 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
  • ch. 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
  • ch. 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
  • ch. 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 prices 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
  • ch. 19 Greek letters
  • 19.1. Illustration
  • 19.2. Naked and covered positions
  • 19.3. 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. 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
  • ch. 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. volatility term structure and volatility surfaces
  • 20.6. Greek letters
  • 20.7. 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
  • ch. 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
  • ch. 22 Value at risk
  • 22.1. VaR measure
  • 22.2. Historical simulation
  • 22.3. Model-building approach
  • 22.4. linear model --
  • Contents note continued: 22.5. 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
  • ch. 23 Estimating volatilities and correlations
  • 23.1. Estimating volatility
  • 23.2. exponentially weighted moving average model
  • 23.3. 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
  • ch. 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
  • ch. 25 Credit derivatives
  • 25.1. Credit default swaps
  • 25.2. Valuation of credit default swaps
  • 25.3. Credit indices
  • 25.4. use of fixed 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
  • ch. 26 Exotic options
  • 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
  • ch. 27 More on models and numerical procedures
  • 27.1. Alternatives to Black--Scholes--Merton
  • 27.2. Stochastic volatility models
  • 27.3. 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
  • ch. 28 Martingales and measures
  • 28.1. 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
  • ch. 29 Interest rate derivatives: The standard market models
  • 29.1. Bond options
  • 29.2. Interest rate caps and floors
  • 29.3. European swap options
  • 29.4. OIS discounting
  • 29.5. Hedging interest rate derivatives
  • Summary
  • Further reading
  • Practice questions
  • Further questions
  • ch. 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
  • ch. 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. general tree-building procedure
  • 31.8. Calibration
  • 31.9. Hedging using a one-factor model
  • Summary
  • Further reading
  • Practice questions
  • Further questions
  • ch. 32 HJM, LMM, and multiple zero curves
  • 32.1. Heath, Jarrow, and Morton model
  • 32.2. LIBOR market model
  • 32.3. Handling multiple zero curves
  • 32.4. Agency mortgage-backed securities
  • Summary
  • Further reading
  • Practice questions
  • Further questions
  • ch. 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
  • ch. 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 question
  • ch. 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
  • ch. 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.
Other information
  • Includes bibliographical references and index.
ISBN
  • 9780133456318
  • 0133456315
Identifying numbers
  • LCCN: 2013042324
  • OCLC: 862928890
  • OCLC: 862928890