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Options, Futures & Other Derivatives with Derivagem CD Value Package (includes Student Solutions Manual for Options, Futuresd Other Derivatives) (7th Edition) 7th Edition

4.3 out of 5 stars 32 customer reviews
ISBN-13: 978-0135052839
ISBN-10: 0135052831
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Product Details

  • Hardcover: 822 pages
  • Publisher: Prentice Hall; 7 edition (August 8, 2008)
  • Language: English
  • ISBN-10: 0135052831
  • ISBN-13: 978-0135052839
  • Product Dimensions: 8.5 x 1.8 x 10.8 inches
  • Shipping Weight: 5 pounds
  • Average Customer Review: 4.2 out of 5 stars  See all reviews (32 customer reviews)
  • Amazon Best Sellers Rank: #1,986,492 in Books (See Top 100 in Books)

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By David R. Harper on November 5, 2008
Format: Hardcover
This is the definitive introduction to derivatives. As evidence of its relevance, the following chapters are assigned to Financial Risk Manager (FRM) candidates: Hedging Strategies using Futures (Chapter 3), Determination of Forward and Futures Prices (5), Interest Rate Futures (6), Swaps (7), Properties of Stock Options (9), Trading Strategies Involving Options (10), Binomial Trees (11), Black-Scholes-Merton Model (13), Greeks (15), Volatility Smiles (16), Exotic Options (22).

Given that this is an expensive text, the most frequent question I get is, do I need to buy the latest edition? Perhaps you do not: the updates from fifth to sixth edition, and from sixth to seventh edition, have both been modest "version" upgrades. Here is a rule-of-thumb: the more introductory the topic (i.e., the earlier the chapter), the less likely you want/need the upgrade. The early chapters on futures, hedging, interest rate futures, swaps, and option pricing have barely changed since the fifth edition. Further, from what i can tell, the end-of-chapter questions are largely the same/similar.

In regard to the seventh, in addition to a number of refinements (e.g., some reorganization), the two noticeable differences are: a new chapter on valuation of employee stock option (a particular expertise of Hull's) and more material on certain credit derivatives (CDOs, credit default swap) including a bit more help on Gaussian copula. However, in regard to credit derivatives, in total, Hull gives a quick tour which may be challenging to the new learner. It is maybe not the best place to start for credit derivatives per se.

But, this is the gold standard, a work of art, as far as finance texts go. It may be an introduction but it offers encyclopedic breadth.
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Format: Hardcover Verified Purchase
I was planning to buy this book for a few years.
This is a classical book on Derivatives. A must have for anyone that is interested in learning how derivatives work and how to price them.
It provides good reasoning and intuitive ideas on risk-neutral pricing. I tried learning that from other books before but the main ideas are so well explained here that now I can understand what those other books say (concepts like market price of risk and the equivalent martingale result for change of numeraire). Interest rate derivatives are well introduced here and the new chapter on more numerical procedures extends the results from previous chapters to dynamics with stochastic volatility and so on.
So, this is a must have and basic reading book for any quant analyst.
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Format: Paperback
This book serves as a nice introduction to mathematical finance. I had to buy this book for a course on options & futures in my master year at university. At first I found it a bit difficult to read, but after studying a lot out of it I got to appreciate it more and more. Certainly the first chapters on pricing futures and the working of calls and puts was very helpful. Somewhere in the first chapters he provides a table which shows how the margin calculations work for a broker account, and how the brokers manage the amount a client owns them by trading in options/futures, which helped me understand this part much better.

A few negative points:

- The chapter on the Black & Scholes formula was way too short. He just throws this formula at you, without an adequate introduction. In the chapter on binomial trees, we do get a full introduction to the pricing methods.
- There should have been more info on interest rate swaps, FX options and swaptions. These are huge fields in the world of derivatives and are only very shortly covered here.
- There are tons of exercises at the end of each chapter, but no solution is provided for most of them. You have to buy his other book for those solutions ... For the price he charges for this book he might as well have given the solutions.

That being sais, I'm glad I have this book in my trading library. It's easy to look up information and the text in each chapter is very straight forward. If you need information on swaptions, weather derivatives, swaptions, calculating a VAR value for your stock portfolio, ... this book is what you need,
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Format: Hardcover
I started reading the third ed., then I went to use the fifth ed. and I finally ended up studying from this 7th.edition.

In my opinion is the most complete edition in achieving an optimal balance between mathematics and content. Each chapter includes all the necessary math to understand from what elements each analysis is structured and Hull also takes the time to explain the practical meaning of each equation. To avoid overwhelming the reader with the demonstrations, they have been included as an appendix at the end of each chapter.

I think this is one of the great books of finance. I have used it for a first course in Derivatives where we cover the first 17 chapters, including "Volatility Smiles" and "Greek Letters". I went back to the book for another course in Financial Engineering, and also used it as reference for a course in Real Options, subject to which Hull devotes an entire chapter.

Hull excels in mathematics, and he gives all the necessary mathematical tools to provide a consistent and technical book, while providing excellent explanations to guide the reader through each topic.

The chapter on "Ito's Lemma" where he describes the modeling of stock prices as a geometric Brownian motion is superb, offering as well a practical way to simulate stock behavior. I actually use this chapter along with MS Excel to do Montecarlo Simulations and to build confidence intervals for the price movements of the SPY, upon I built an active investment strategy.
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