Exotic Options: A Guide to Second Generation Options [Hardcover]

P. G. Zhang (Author), Peter G. Zhang (Author)

Book Description

Publication Date: December 1996

This is a systematic classification and treatment of essentially all exotic options currently trading at the Over-the-Counter (OTC) market. It aims to be an industry standard book on this subject. It contains exact closed-form pricing formulae and approximated closed-form pricing formulae for all popular exotic optics. It includes arguments for and pricing formulae of exotic options with more flexibility than most popular exotic options such as Asian options with the underlying assets, etc. Most of the analyses in this book are within the Black-Scholes environment so that comparisons of each type of exotic options with the Black-Schles model can be made readily. Emphases have been paid to illustrate the ideas of products clearly and show how to use the pricing expressions conveniently. The book contains many pricing formulae and analyses which do not exist in the literature. The book is suitable for traders, analysts, risk managers, marketers, sales people, professionals in the derivatives industry, and financial professionals in general who have an interest in the concurrent status of the exotic derivatives market. It is also of great interest to professors and graduate students who want to catch up with the ever growing innovation process in the derivatives industry. Scientists, engineers, computer programmers, and other professionals may also find the book an efficient way to grasp some financial ideas and connect financial products with mathematical tools.

Editorial Reviews

Review

"This is the most complete conventional option pricing book currently available." -- Nassim Taleb, Derivatives Strategy --This text refers to an out of print or unavailable edition of this title.

Product Details

• Hardcover: 675 pages
• Publisher: World Scientific Pub Co Inc (December 1996)
• Language: English
• ISBN-10: 981022222X
• ISBN-13: 978-9810222222
• Product Dimensions: 10.2 x 7 x 1.5 inches
• Shipping Weight: 2.9 pounds
• Average Customer Review: 3.1 out of 5 stars  See all reviews (7 customer reviews)
• Amazon Best Sellers Rank: #5,402,048 in Books (See Top 100 in Books)

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Most Helpful Customer Reviews

15 of 16 people found the following review helpful:

5.0 out of 5 stars Too much errors !!!, January 21, 1998

By A Customer

This review is from: Exotic Options: A Guide to Second Generation Options (Hardcover)

Hello, I bought the book "Exotic Options of Zhang" few days ago. I'm a french reader working in a big french Broker firm. I note some mistakes in the two first parts of your book. Here is the list. Page 8: In the table MQTIF -> MATIF Marche A Terme International de France Page 11: In the footnote CAC 40 (or 240) is now for "Cotation Assistee en Continue" instead of "Compagnie des Agents de Change" Page 28: "Fisher Black... now a partner at Goldman Sachs..." In fact, I think he is resting in peace now ! Page 35: In the footnote A wrong "r" replaces the greek letter sigma, and confusion in the stochastic process between the Brownian and the process dz(t). Page 51: In Appendix (A2.4) dz(t) instead of z(t) Page 60: Equation (3.5) No "S" term in the pricing formula of the future option. Page 66: I think that the model of Heston for stochastic volatility is more accurate to deal with. Page 75: "An option's theta is always positive because there is always more possibility..." I think it's only true for call option, indeed the case of deep in the money put is different. Page 100 & 101 : Figure 4.6 & 4.7 Confusion in the trees between payoffs and values of option. Text says .." $5.61 because it is larger than the corresponding value $4.78.." and the tree shows in fact a value of 5.16 at node G. In Fig 4.6, the node in the first step with the value $5.61 is inferior to the value of the european case $6.04 (Fig 4.5) ? In fig 4.7 , no final price for the option, the final node is blank. Page 102 : "In Example 4.3 and 4.4, the European and American Put option prices are..." instead of "Example 4.4 and 4.5" Page 114 : At the top of the page "...asset price in (2.4) or (4.3)." instead of "...asset price in (2.4) or (5.3)." Page 118 & 119 : In example 5.4 & 5.5 1) "+ N(0.1372) " instead of "x N(0.1372)". 2) exp(-0.07) = 0.9324 and not 0.9236 ?! 3) Finally the price of the call C is not $20.117. 3 bis) Missing sign equal "=" (replaced by a minus "-" ?!) 4) Same problem for the put. 5) In Example 5.5 reference to example 5.3 and 5.2 instead of 5.4 ! Page 120 : Equation (5.13) "t* - s" instead of "t* s" in the denominator Page 121 : Example 5.6 I think the same kind of problem in the numerical application of the formula. Page 123 : "The Asian call option prices become higher with more frequent obsrevations as shown in Table 5.1" obsrevations -> observations higher -> lower ... I think ?!! Page 124 : Example 5.7 You note "yield on the undelying asset is zero" but you write next "g = 0.03" You write twice T sa_mu,n-j ? Impossible to find your result for the correlation 0.883 ???? except if in (5.18) the second term (r-g-.5*s*s) is not squared ! Page 125 : Example 5.9 WRONG ONE MORE TIMES How do you find 0.4583 for te ??? Page 126 : Example 5.10 The value of Dcg1 and Dcg2 are swapped in the price of the call. Idem for the put , where the litteral equation and its application are false (Minus sign, exponential disappears,...) ! Page 127 : In Equation 5.22 Miss a starting parenthese "(" Page 135 : In Equation 6.2, the second SUM sign is in fact a MULTIPLICATION sign, isnt'it? I continue my interested [and careful ;-) ] reading... Michel KUREK EMAIL: [e-mail]

7 of 7 people found the following review helpful:

2.0 out of 5 stars Lots of promise but flawed., March 26, 1998

By A Customer

This review is from: Exotic Options: A Guide to Second Generation Options (Hardcover)

This could have been a very valuable addition to my growing list of books on derivative pricing. As many other readers have mentioned, there are so many typos as to make it nearly worthless to the reader. The author, publisher or editor owes every purchaser of this book a complete errata sheet (could be as large as the book itself). I did find the section on the distribution of the correlation coefficient very interesting.

2 of 2 people found the following review helpful:

1.0 out of 5 stars Too Many Mistakes!, February 7, 2003

By A Customer

This review is from: Exotic Options: A Guide to Second Generation Options (Paperback)

This could be a good book if it weren't for all of the errors. The typos, inconsistent formulas, and algebraic mistakes make you wonder if the author was awake when he wrote this book.