Customer Reviews

Options, Futures, and Other Derivatives (4th Edition)

5 star:		(12)
4 star:		(3)
3 star:		(2)
2 star:		(1)
1 star:		(0)

 

 

This book has been the standard text for mathematicians, physicists, and engineers retooling for Wall Street. I agree with the praise of other reviewers - especially 'a reader' on September 20, 1996. This book is still a gem. For a full PDE approach I recommend "Option Pricing: Mathematical Models and Computations" by Wilmott, Dewynne, and Howison. For a good probability theory approach, I recommend "Financial Calculus" by Baxter and Rennie. One reservation on Hull's book - it will be difficult for many readers with economic/finance/MBA backgrounds not completely fluent in calculus.

First, my review refers to the 1997 3rd edition.

Since this book is regarded as the bible of derivatives (it was also my first introduction) I will leave it to others to praise it and concentrate instead on what's wrong with it. First and foremost, one cannot learn how correctly to formulate solutions to stochastic differential equations from this text: eqns. (10.7,8), e.g., are not correct for arbitrary returns but are valid only as approxmations for small returns (Hull leads the reader to believe the opposite). The problem is that Ito's lemma is only stated, not proven, and it's the proof that shows one how to formulate correctly the stochastic integral equations that Hull calls 'stochastic difference equations'. When volatility depends on returns and/or time, then the errors made from following Hull's oversimplified treatment become serious.

My first impression of Baxter & Rennie's 'Financial Calculus' was that it was unnecessary and a waste of money. My opinion reversed completely after realizing (under prodding by a physics colleague who's an expert on sde's) how badly Hull's approach to sde's really is. Also, the systematic derivation of Black-Scholes from the assumption of a replicating, self-financing strategy in B&R is very nice. As Feynman said, we don't really understand a result until we can derive it from many different viewpoints. The method is not really different in principle from the standard short derivation given in Hull, but it does provide a nice, clear example of what is meant by replication and self-financing in the terminology of Brownian motion/sde's.

I took Prof Hull's Advanced Risk Management class a few years ago with lecture notes. I also have the previous edition of this book, but I still bought this one. It took me three days to read the book cover-to-cover, and I have to say I still enjoy reading it very much. Assuming minimum math background (basic calculus and prob theory), Prof Hull introduced the world of derivatives, pricing, risk mgmt in plain English. By far, it's still the best introductory level book on derivatives, with balanced treatment of pde and risk-neutral valuation (not like Wilmott's book - almost 100% pde and ignoring risk-neutral altogether). For a bit more advanced reading, Neftci's Intro to Math of Derivatives is a good one. However, to have a complete picture of derivatives pricing, stochastic calculus (at the level of Karatzas & Shreve' Brownian Motion and Stochastic Calculus) is a must, which will instead need a fair exposure to real analysis, measure-theory level prob theory, and ode/pde. For readers who want some knowledge of derivatives but don't want to be quant, Hull's book pretty much tells you everything you ever want to know about derivatives.

I've been teaching Finance courses (Mathematical Finance, Financial Programming) for several years now, and this text is the only one that has remained with me the entire time. It is a little too sketchy to serve as a sole textbook, but works well as an irreplaceable reference text that can be counted on for a few words on practically anything having to do with derivatives.One of the main advantages of this book is that it has very few mistakes. This is unfortunately quite rare for books in the field. One glaring error -- ignoring the early exercise boundary condition while solving the matrix equations for an implicit finite difference scheme.Frequent editions of the book keep me buying new copies, but the new version is usually worth it.

Hull's text is the definitive text on futures and options. The book provides the basis for understanding the underlying principles for valuing derivatives intstruments. Since the text is academic and theoretical in nature, the book is geared towards graduate business school students and Wall Street professionals (and maybe only those working on trading/research desks). For the day-trading crowd, you will not find any specific discussions about trading strategies that make money. Instead, you will be enriched with a fundamental understanding of derivatives pricing --- from there you can try to earn your riches.

I grew up on the earlier editions of this book. But now it's well past its prime, very old fashioned. The financial world has moved on at lot in recent years. Due to the influx of serious scientists PDEs are increasingly used in practice, and there's very little of this subject in the book. It's still used in univs but less by serious quants.

While this is the standard text it surpasses that role in its treatment, content, and depth. It is also a professionals handbook. This is a book that rewards deep study and I turn to it and learn from it over and over again.

It treats issues on bonds and interest rate derivatives better than any other text I have seen. Getting this text and the related solutions manual will allow you to work the exercises on your own. The topics will become more transparent as you work through those problems because these topics are better understood by doing than just through head work.

Terrific! Thanks, Dr. Hull.

This book seems to be very popular in MBA/Computational Finance courses in the US. However, whether the popularity (in the MBA level) stems from the readability quality of the book itself, is doubtful. The book has its merits- it is comprehensive, has all the right materials, and also the derivations of all the complicated formulae. However, the manner in which the material is presented can only be described as unimaginative. There is a constant stream of cross-references throughout the book, which will leave the reader feeling frustrated. The book goes forward in fits and starts and there is a distinct lack of cohesion in the treatise. Also, the book assumes that the reader is not mathematically sophisticated, but uses shortcuts and jumps computational steps regularly, which adds to the students' woes. The description of the different types of options are pleasant to read, and so also is the chapter on value at risk, but the rest of the book leaves the students confused. To read this book, the reader should be adept in using standard mathematical tools like arithmetic and algebra and also be somewhat proficient in probability. However, this book is great for practitioners. I have simulated all sorts of options scenarios, from simple Black-Scholes model, to the AMM approach, barrier options and multinomial models. For each of these models I found direct or indirect help from the Hull book. For beginners, I would recommend the book by Jarrow and Turnbull and advise them to keep this book as a reference for the future.

Comprehensive, understandable, practical, accurate --- quite simply the best book on this most complex area of finance. A fixture on trading desks the world over. Get it, do the exercises, and you'll be way ahead of most practitioners in this area.

There is a reason that this text has been in print for so many years - in my view it is the Samuelson of the financial world because there is no other work that presents such a cogent as well as comprehensive introduction to the mechanics of derivatives securities. As a person involved in dealing with these monsters on a daily basis, Hull lives on my desk and has been a constant source of reference. It is also widely used by others in the industry. If Wiener Processes and Ito's Lemma are part of your life, this book is the one to get! PS...the solutions manual is a very useful companion if you want to get full value out of the book, but I have always thought it unfair of textbook publishers to print separate solutions texts when the main work is so expensive in the first place. Is it so hard or costly to tack on 50 extra pages, or it the old story of the monopolist extracting his due?