Options, Futures, and
Other Derivatives, 11th Edition

New Features:

A major change in financial markets is the phase out of LIBOR. This has led to important changes throughout the 11th edition. The overnight reference rates that replace LIBOR, and the way they are used to determine zero curves, are discussed carefully.

· Within-chapter examples and end-of-chapter problems that were previously based on LIBOR have been largely replaced by examples based on the new reference rates or generic examples.

· The likely impact of the new reference rates on valuation models is discussed.

· The new reference rates are considered to be risk-free whereas LIBOR incorporates a time-varying credit spread. The book discusses the desire on the part of banks to augment the new reference rates with a measure of the level of credit spreads in the market.

· The chapter on Wiener processes now covers fractional Brownian motion. This is becoming increasingly used in modeling volatility.

· Rough volatility models which have in the last few years been found to fit volatility surfaces well are added to models considered in Chapter 27.

· Machine learning is becoming increasingly used in pricing and hedging derivatives. The reader is introduced to these applications at various points in the book.

· Changes in the regulatory environment, including Basel IV, are covered.

· To help students determine whether key ideas have been understood, short concept questions are included at the ends of the first 20 chapters (North American edition only).

· The end-of-chapter problems have been updated. To make the book as easy to use as possible, solutions to all end-of-chapter problems are now on www.pearson.com and on this website

· Instructor support material has been revised. In particular, there are now many more suggestions on assignments questions that can be used in conjunction with chapters.

· The DerivaGem software is less LIBOR-focused and is available for download from this website.

· Tables, charts, and market data have been updated throughout the book.