Options, Futures, and
Other Derivatives, Fifth Edition
The following typos
and other errors are in the first printings of the book and the Solutions Manual.
We have tried to correct them in subsequent printings and so they may not be
present in the copy you have.
Errata in Book:
Page 11, line 18:
September should be November (This was kindly pointed out by Emilio Barone)
Page 38 Problem 2.4
line 4: December 2000 should be December 2002. (This was kindly brought to my
attention by Shin-ichi Yanagi)
Page 90 Problem
4.24: The three numbers in the March 2004
futures price row should be moved one column to the right (so that 70.70,
64.30 and 76.70 are the Feb 2003, Aug 2003, and Feb 2004 prices for the March
2004 futures, respectively) and the three numbers in the
Sept 2004 futures price row should be moved two columns to the right (so that
64.20, 76.50, and 88.20 are Aug 2003, Feb 2004, and Aug 2004 prices of
the Sept 2004 futures, respectively).
This was kindly brought to my attention by Ramon Rabinovitch.
Page 114: in
equation on line 13 change last term on left hand side from 105e-0.121×1.5 to 105e-0.121×3.0 ( This was kindly pointed out by
Page 122, line 1:
in Problem 5.12 should read: in Problem 5.13. (This was kindly brought to my
attention by Shin-ichi Yanagi)
Page 130: line 6 of
Day Count Conventions Section, 2001 should be 2003 in two places. (This was
kindly brought to my attention by Shawn Kocher)
Page 143: line 18:
...is received and sterling is paid is should be ...is received and dollars are paid is. (This
was kindly brought to my attention by Masanori Hiramoto)
Page 147, Suggestions
for Further Reading, line 8: 1985 should be 1995 (This was kindly pointed out
by Emilio Barone)
Page 151: line 3:
The are four should be: There are four (This was kindly pointed out by Kiyosei Sugioka)
Page 171
Section 8.3 line 2: Change previous section to Section 8.1 (This was kindly pointed
out by Emilio Barone)
Page
183 Problem 8.19: Change Section 7.12 to
Section 7.10 (This was kindly pointed out by Yoshiyuki Saito)
Page 198 line 4:
Scott J.S. should be Chaput J.S.
Page 199: last
line, $30 should be $25 (This was kindly pointed out by Edward Kao)
Page 215, Problem
10.18: Change max[(30-ST)2, 0] to [max(30-ST,
0)]2. This was kindly pointed out by
Page 232 line 9:
The third term on the right hand side of the equation should be multiplied by
1/6 (This was kindly brought to my attention
by Max Petronevich)
Page 245, 12 lines
from bottom: Change Section 3.5 to Section 3.8 (This was kindly pointed out by
Emilio Barone)
Page 250, 11 lines
from bottom: Change In Section 12.3 to: In Section 12.4 (This was kindly
pointed out by Hsiu-An Lin)
Page 268: Equation
(13.2) should be p0 ≥ max(Ke-rT - S0e-qT,
0)
Page 292 line 15:
Change Ke-r(T-t) to Ke-rT (This was kindly pointed out by Emilio Barone)
Page 307: The
cumulative cost for week 3 in Table 14.2 should be 2,966.6 rather than 2,996.6.
(This was kindly brought to my attention
by Jean-Guy Simonato)
Page 315: In
Example 14.5 gamma is 0.00857 not 0.00866. (This was kindly pointed out by Bernd Roosch)
Page 328 line 1:
Change: Consider again the situation in Problem 14.24 To: Consider again the
situation in Problem 14.25
Page 381: Final
equation should be 
(This was kindly
pointed out by Edward Kao)
Page 382: First
line under table, k should be K (This was kindly pointed out by Mitesh
Patel)
Page 390: Problem
17.14. For clarity replace: variance by: square of the volatility (This was
kindly pointed out by Mitesh Patel)
Page 404 line 6:
Change Section 12.12 to Section 12.13 (This was kindly pointed out by Emilio
Barone)
Page 432 line 12:
Change Section 12.12 to Section 12.13 (This was kindly pointed out by Emilio
Barone)
Page 457 line 15:
The equations for a, b, and c involve a small approximation.
The exact equations are
This was kindly brought
to my attention by Rolf Poulsen.
Page 457 lines 16
and 18: 
should be 
in two places. (This
was kindly pointed out by Giancarlo Pfeifer).
Page 481 Problem
20.15 line 2: Change different to difference (This was kindly pointed out by
Emilio Barone)
Page 482 line 6:
change option to spread; also, second line from bottom change smile of skew to:
smile or skew. (This was kindly pointed out by Emilio Barone)
Page 497 six lines
from bottom: Change F0 to F(0)
Page 498 second and
third line of Example 21.4: change yen dividend yield to Nikkei dividend yield.
(I am grateful to Christophe Bonvin for pointing this out)
Page 512 line 1:
Change Section 3.3 to Section 3.6 (This was kindly pointed out by Emilio
Barone)
Page
557: 13th line: left hand side of equation should read: 
not 
(This was kindly
pointed out by Philipp Werneburg)
Page 576: To be
consistent with equation (24.6) the final terms in equations (24.8) and (24.9)
should have the opposite sign (– rather than +). In fact, the sign is moot as
changing dz to –dz produces the same model. This was kindly brought to my attention
by Narayanan Padmanabhan.
Page 589 second reference: The Andersen paper
was published in Journal of Computational
Finance, 3, 2, (Winter 2000) 5-32 (This was kindly pointed out by Emilio Barone)
Page 596 footnote
1: change annual compounding to semiannual compounding (This was kindly pointed
out by Emilio Barone)
Page 600: 3 lines from bottom: Change $130,545
to $159,811. (This was kindly brought to my attention by Toshihisa Taguchi)
Page 603 six lines from bottom: Change d1
to d2 and d1* to d2* (This was kindly pointed out
by Emilio Barone)
Page 613: 12 lines
from bottom: replace in year 3 by in year 4 (This was kindly pointed out by
Emilio Barone)
Page 629: on line 5
N -1(0.03) should be N -1(0.10); on line 6 N -1(0.03) should be N -1(0.15)
Page 634: Problem
26.11 change three-year to five-year (This was kindly pointed out by Hsiu-An Lin)
Page 640 line 5:
The final term should be –wpu(T) not +wpu(T). (This was kindly brought to my attention by Tomoyuki
Yamamoto.)
Page
640, Example 27.1, line 10: (1-0.3-0.05×0.03) should be
(1-0.3-0.05×0.3). On the penultimate line 0.1891 should be 0.01891 and on the
last line 0.09455% should be 0.9455% (This was kindly pointed out by Takashi Kanazawa.)
Page 643, footnote 5: Change Section 26.7 to
Section 26.8 (This was kindly pointed
out by Emilio Barone)
Page 644 line 25:
Insert word million after $100 (This was kindly pointed out by Micha Keijzers)
Page 655 line 14:
Change enter into a credit default swap where to: enter into a total return
swap where (This was kindly pointed out by Emilio Barone)
Page 656 Problem
27.1, line 4: Change for the seller to: for the buyer (This was kindly pointed
out by Emilio Barone)
Page 657: In
Problem 27.18 change: Suppose that in Problem 27.20. to: Suppose that in
Problem 27.17.... (This was kindly pointed out by Takashi Kanazawa.)
Page 658, Problem 27.20: On line 4 of this assignment
question, 0.2 should be 0.02 and 0.25 should be 0.025.
Page 669: In the
paragraph before Figure 28.1, change 3.464 to 0.3464 in two places, change,
-3.464 to -0.3464 in two places, change 3.364 to 0.3464 in two places, and
change -3.364 to -0.3464 in two places. (This was kindly brought to my
attention by Anthony Pule)
Page 671, four lines from
bottom: Change The is.. to There is.. (This was kindly pointed out by Takashi Kanazawa.)
Page 674: line 7: change: If the option is not exercised... to If
the option is exercised... (This was kindly brought to my attention by Masayuki Barada)
Page 688: In Table
30.2 change 1.8 million to 1.8 billion in paragraph on Metallgesellschaft.
(This was kindly brought to my attention by by Kaoru Ono)
Page 689: In the
paragraph beginning An example will illustrate the point here, change 10 stocks
to 20 stocks on the first and fourth line.
Errata in Solutions Manual
Page 2, line 2:
Replace IBM by AOL Time Warner. (This was kindly pointed out by José Daniel Medeiros.)
Page 11, Problem
2.11: On the third line of the answer to this problem, change: the value of one
contract rises by $1,000 to: there is a gain on one contract of $1,000 (This
was kindly brought to my attention by David Ha.)
Page 26, Problem
5.8: In the equation, the exponents should have minus signs so that it becomes:
2e-0.04×0.5+2e-0.042×1.0+2e-0.044×1.5+2e-0.046×2.+102e-0.048×2.5=98.04
This was kindly
pointed out to me by Matthew Merkley.
Page 29, Problem 5.21,
line 10: Replace 100 - 89.77 = 10.23 by 100 - 8.977 = 91.023 (This was kindly pointed out
by Emilio Barone)
Page 31: The first
two lines of 5.29 are missing. They are: The par yield is the yield on a
coupon-bearing bond that is worth par. The zero rate is the yield on a
zero-coupon bond. When the yield curve is upward sloping, the yield on an N-year...... This was kindly pointed out
to me by Matthew Merkley.
Page 33, Problem 6.4:,
line 7: Replace LIBOR rate with LIBOR par yield (This was kindly pointed out by
Emilio Barone)
Page 44: line 19:
max (ST, 0) should be max
(ST – K, 0).This was kindly pointed out by Ron Baakonen
Page 65: line 3:
delete: on the stock.
Page 73: Problem
12.21: On the second line we should have t1=0.3333,
t2=0.8333, T=1.25. This was kindly pointed out by Adrian Soriano.
Page 88: Problem 13.39: The corporation
requires a payoff of 5,000,000×0.0001×0.25X=125X, not 500X. A total of 5, not 20, contracts are therefore required. This was
kindly pointed out by Adam Jones
Page 98: Problem 14.20: ninth line should be
=e─0.03×1(0.6737─1) not =e─0.03×0.5(0.6737─1).
This was kindly pointed out by
Page 103: line 11: S0=0.7000 should be S0=0.8000.
Also the mean of ln ST on
line 13 should be -0.2249, not -0.2240. As a result the answers to a), b) c),
d) and e) should be 1.41%, 13.38%, 36.41%, 33.90%, 12.59%, and 2.31%,
respectively. (This was kindly pointed
out by
Page 104 , last line of 15.13: (b) and (d)
should be (b) and (e). This was kindly
pointed out by
Page 106, Problem
16.1: Solutions Manual calculates the 5-day 95% VaR. The problem asks for the
5-day 99% VaR. This is 2.33×3605.55=8400.93. (This was kindly pointed out to me
by Tsutomu Okuyama.)
Page 109, Problem
16.11: 4th line from end: change 3-month to 5-year. (This was kindly
pointed out by Charely Hsu.)
Page 110, line 2:
3.1062 should be 3.102 (This was kindly pointed out by Charely Hsu.)
Page 113, Problem
17.10: Change V to VL in two places in the
equation on line 4 (This was kindly pointed out by Emilio Barone)
Page 115, three
lines from bottom: last term in equation should be multiplied by V so that it is 
(This was kindly pointed out by Emilio Barone)
Page 118, line 1:
Change Chapter 18 describes to: Chapter 20 describes (This was kindly pointed
out by Emilio Barone)
Page 120, Problem
18.11: Change 0.535 to 0.487 in line 10 (This was kindly brought to my attention
by David Ha.)
Page 134, line 11:
Sign of last term on right hand side of equation for p should be + not –.
Page 140, Figure
20.1: Change the third number on the upper node at the end of the first step of
the tree from 1.8970 to 0.1897.
Page 141 Problem
20.12: fourth line from end, exchange rate should be stock price (This was
kindly pointed out by Hsiu-An Lin)
Page 144, Last
line: Change 19.8% to 13.8% (This was kindly brought to my attention by David
Ha.)
Page 145 Problem
21.5: On the right hand side of the equations on lines 7 and 8 of the answer to
this problem, S12
should be inserted after s12 in the fourth term, S22 should be inserted after s22 in the fifth term, S1S2 should be
inserted after s1s2 in the sixth term. On the right hand side of the equation on the
last line of the page S12
should be inserted after s12 in the second term, S22 should be inserted after s22 in the third term, S1S2 should be
inserted after s1s2 in the fourth term. (This
was kindly brought to my attention by David Ha.)
Page 146: In the
left hand side of the equation on the fifth line, S12 should be inserted after s12 in the second term, S22 should be inserted after s22 in the third term, S1S2 should be
inserted after s1s2 in the fourth term. In the left
hand side of the equation on the seventh line, S12 should be inserted after s12 in the fourth term, S22 should be inserted after s22 in the fifth term, S1S2 should be
inserted after s1s2 in the sixth term. (This
was kindly brought to my attention by David Ha.)
Page 149, Problem
21.12: Change large ( to large [ in each of the first two equations; change
large ) to small ) and small ] to large ] in third equation and fourth equation
(This was kindly pointed out by Emilio Barone)
Page 149, Problem
21.13: Change sh,i- sg,i to sh,i-sg,i in the second equation. (This was
kindly pointed out by Emilio Barone)
Page 150, line 1:
Change 21.5A to 21A.5. Also in the last equation of Problem 21.14 change sf,i to sh,i (This was kindly pointed out by Emilio Barone)
Page 151 Problem
22.4: Formula for the convexity adjustment should be 
. (This was kindly
pointed out by Nick Mocciolo.)
Page 154 Problem 22.16: Delete sentence: With
continuous compounding....6.39%. In the expression for the caplet price change
0.0639 to 0.069394 and change the answer from 5.31 to 5.29. (I am grateful to
Page 155 Problem
22.18 b): 0.9627 should be 0.966. This leads the value of the instrument being
-$0.050 not -$0.086. (This was kindly pointed out by
Page 157, line 4:
Change life of bond to: life of option (This was kindly pointed out by Emilio
Barone)
Page 161: The
numbers are wrong in the answers to 23.9 and 23.10. In 23.9 r* should be 0.066. The strikes are 2.43473 and
96.56438. The values of the two options are 0.0091 and 0.8062 for a total value
of 0.8152. In the answer to 23.10
c=0.8152, PV(K)=87.1222, B0-I=87.4730 to give a put price of 0.4644.
(I am grateful to Gunther Hahn for pointing this out.)
Page 165, Problem
23.23: First line: Change From equation (23.14) to From equation (23.19). Fifth
equation: add a bracket ) to denominator. Last equation: Change A(t,t+dt) to ln A(t,t+dt) (This was kindly pointed
out by Emilio Barone)
Page 166, five
lines from bottom: Change Figure 22.1 to Figure 24.1. (This was kindly pointed
out by Emilio Barone)
Page 168: in first
equation last term add a subscript k
to the v. Also 
should have a final ) in four places in the third, fourth, and fifth
equations (This was kindly pointed out by Emilio Barone)
Page 169, Problem
24.6 last line: equations (21.17) and (21.18) should be equations (23.17) and
(23.18). (This was kindly pointed out by Emilio Barone)
Page 174, Problem
25.6: Change $97,282 to $119,069 on last line. (This was kindly pointed out by
Page 175, Problem
26.6, line 2: insert ( before 103.762. (This was kindly pointed out by Emilio
Barone)
Page 176, Problem
26.9, line 3: change credit loss to: default. (This was kindly pointed out by
Emilio Barone)
Page 177, Problem
26.10, line 4: 103643 should be 1.03643. Problem 26.11, line 4: 105.3597 should
be 105.3579. Problem 26.11, line 6: The spread paid should be: The spread received
(This was kindly pointed out by Emilio Barone)
Page 179, Problem
27.3: In the equation for s change
0.3 to 0.4 in two places, change 0.7 to 0.6 and change 0.01564 to 0.01557. the
final line should say that the credit default swap spread is 155.7 basis
points.
Page 183: Change
105.88 to 102.75 on line 12 and 124.89 to 121.76 on line 15 (This was kindly
pointed out by Hsiu-An Lin)
Page 187, Problem
28.8: line 2 change three years to four years. Also the expression on the fifth
line should have a ] on the end.