Text corrections
P. 11, First two full sentences "Then when ... pay back your broker" should be replaced by "Then when the state of the world is revealed, you can sell your two shares of S2 and generate exactly the amount of cash you need to buy the one share of S1 you will need to pay back your broker." Thanks to Dave Smith for catching this one.
P. 50, fourth line. Sentence should read "greater than the option value plus 10 percent of the value of the stock." Thanks to Matthew Leung for catching this one.
P. 69, first full paragraph, 6th line. There should be a right parenthesis after the X (before the period).
P. 73, 2nd full paragraph. Change from "Chapter 3" to "Chapter 4" and "Chapter 4" to "Chapter 5". Thanks to Dave Smith.
P. 83, 2nd paragraph under "The Early Exercise ...". Change "stock goes to bankrupt" to "company goes bankrupt". Thanks to Dave Smith.
P. 88, 5th line of top column at right. First "T" should be an exponent/superscript. Thanks to Dave Smith.
P. 112, the equation under Stock Goes to 125. The denominator should be 156.25 - 100. Thanks to Steven Shang for catching this one.
P. 128, Problem 19. Delete the sentence "Assume that one share of stock is used and determine the formula for the dollar amount to be invested in the risk-free bond." Then change the wording on "... have B dollars invested in the bond earning r percent" to "... issue B dollars of bonds paying r percent." Thanks to Bob Welch for catching this one.
P. 141, the equation for C is missing a minus sign in front of the 125.
P. 160, Table 5.3, there should be a 1 in front of -.5557. Thanks to Mike Hemler for catching this one.
P. 167, Table 5.6, the price for April 20 should be 148.688, not 146.688
P. 172, 12th line, it should say that the June 120 is less expensive than the June 125. Thanks to Ryan Ortiz for catching this one.
P. 178, Table 5.9, the stock price on day 14 should be 124.9930, not 124.9330. Thanks to Ben Sun for catching this one.
P. 245, second full paragraph. The range of profits for the bull spread should be "X2 - X1 - C1 + C2 - (-C1 + C2)". Thanks to Wu Cheng for catching this one.
P. 245, fourth line from the bottom. Change "disadvantage" to "advantage." Thanks to my student Rachel Schwehm for catching this one.
P. 304, first line in paragraph The Value of a Forward Contract. The second V should be lower case. Lower case is used for futures, upper case for forward. Thanks to Ben Sun for catching this one.
P. 325. The symbol δ (lower case delta) for the continuously compounded foreign risk-free rate should have a subscript "c" in eight instances on this page. Thanks to Bruce Bagamery for catching this.
P. 377, Problem 14. At the end of the problem add the sentence, "The Canadian dollar futures contract covers CD100,000." Thanks to my student Rachel Schwehm for catching this one.
P. 388, Table 11.2, Under Analysis, second line, "10(980,100 2 $978,425) 5 $16,750" should be "10(980,100 - $978,425) = $16,750".
PP. 404-405, The symbol δ (lower case delta) for the continuously compounded foreign risk-free rate should have a subscript "c" in two instances on p. 404 and two on 405.. Thanks to Bruce Bagamery for catching this.
P. 409, first line, delete the entire paragraph and replace with "or underpriced, it tends to stay overpriced or underpriced rather than reversing from overpriced to underpriced or vice versa. Sofianos (1993) found that it was very difficult to profit from index arbitrage after accounting for the problem of simultaneously executing all trades.
P. 427, shaded equation. Change "principle" to "principal." Thanks to Bruce Bagamery.
P. 429, Table 12.1, second line (Mar 15), ABSwaps Owes, should be 958,833, not 958,333.
P. 433, Table 12.2, typo. R should be .0975 instead of .975.
P. 434, Table 12.3, the notation for LIBOR and the Discount Bond price. The terms in parentheses should be 90, 270, 450, and 630, not 180, 360, 540, and 720. (Note: the last discount bond price has the correct term in parentheses but the others need to be changed.) The term in parentheses represents the xx-day rate where xx is 90, 270, etc.
P. 436, Table 12.5, the notation for the Pure Discount Bond Price for both T-bills and LIBOR. The terms in parentheses should be 90 and 270 instead of 180 and 360. The term in parentheses represents the xx-day rate where xx is 90, 270, etc. Also, in the third calculation at the bottom, the first equals sign should be a minus sign. Thanks to Ben Sun.
P. 444, Table 12.7, the notation for the Discount Bond Price for both dollars and euros. The terms in parentheses should be 90, 270, 450, and 630, not 180, 360, 540, and 720. The term in parentheses represents the xx-day rate where xx is 90, 270, etc.
P. 448, Figure 12-8, second line of the Scenario. The euro currency symbol (€) is missing in front of the amount 10 million. Also on same page, third paragraph, change "if Reston borrowed in dollars,..." to "If Reston borrowed in euros, ...". Thanks to Risei Goto for catching this one.
P. 454, Table 12.10, the notation for the Rate and Discount Bond Price. The terms in parentheses should be 30, 120, 210, and 300 instead of 90, 180, 270, and 360. The term in parentheses represents the xx-day rate where xx is 90, 270, etc. Thanks to Ben Sun.
PP. 454-455, next to last equation, -0.00297941 should be 0.00297941. Same correction on the last equation, and the last value should be $74,485. On p. 455, change -$74,485 to 74,485 and the answer from -$302,449 to -$153,479. Thanks to Bob Welch.
P. 480, last equation, numerator should be $20,650,000.
Powerpoint Corrections
Chapter 3, #10: On the third bulleted point, the stock price symbols should have a zero subscript.
Chapter 4, #26: The denominator of the equation should be 156.25 - 100.
Chapter 4, #32: The subscript on the call price on the last equation should not have the u. Thanks to Mike Hemler for catching this one.
Chapter 4, #33: The subscript on the call price on the equation should not have the u. Thanks to Mike Hemler for catching this one.
Chapter 4, #39: The adjustment for the risk-free rate should be (1 + r)T/n - 1. (the -1 added)
Chapter 5, #68. This correction is due to the typo in Table 5.3. See the "Text Correction" for p. 160.
Chapter 5, #79: This correction is due to the typo in Table 5.9. See the "Text Correction" for p. 178.
Chapter 9, #5: The equation for Vt(0,T) is missing the term "1 + r" between "F(0,T)" and the exponent "-(T-t)". Also, at the end of the first bulleted point, it should say "prior to T", not "t". Thanks to William Leahey for this one.
Chapter 10, #7: Last line, the subscript on the first "f" should be "t", not "f".
Chapter 11, #43: This correction is due to the typo in Table 11.2. See the "Text Correction" for p. 388.
Chapter 12, #37: This correction is due to the typo in Table 12.2. See the "Text Correction" for p. 433.
Chapter 12, #26: This correction is due to the error on pp. 454-455. Change -0.00297941 to 0.00297941, -$74,485 to $74,485, and on the last line, -$74,485 to $74,485 and -$302,449 to -$153,479.
Chapter 12, #34: This correction is due to the typo on Table 12.1. See the "Text Correction" for p. 429.
Chapter 12, #38: This correction is due to the typo in Table 12.3. See the "Text Correction" for p. 434.
Chapter 12, #45: This correction is due to the typo in Table 12.7. See the "Text Correction" for p. 444.
Chapter 13, #17: Second bulleted point should say "a combination of interest rate puts".
Solutions Corrections
Chapter 4, # 19, p. 23. You should be issuing bonds so change "invested in bonds" to issued in bonds" on first line. Then change the sign on B to negative in the equations for V and Cu and Cd. Add a minus sign to the right of the equals sign for the equation for B. Next paragraph, change the sign on B to minus in two places. Thanks to Bob Welch for catching this one.
Chapter 5, #22, p. 32. We need to buy stock instead of selling short. The negative value of h arises because we found h to be the negative of the put delta. Thus, h should actually be the negative of the negative put delta, so it would be positive. Or in simple terms, when buying the put we hedge by buying the stock. Thanks to Marcus Toft for catching this one.
Chapter 9, #10, p. 64. The solution given was based on a slight variation of the problem for the previous edition. A corrected solution is available here. Thanks to my student Luke Lemoine for catching this one.
Chapter 9, #14, p. 65. The calculation of f0(T) contains a typo. The exponent should be .0596, not .0296. The answer is correct. Thanks to my student Luke Lemoine for catching this one.
Chapter 11, #20, part b. After the calculation of $73,500, the next paragraph should say. "The value of the domestic stock goes up to $20,000,000(1.02) = $20,400,000. The total value of the portfolio is
$20,400,000 - $99,000 + $73,500 = $20,374,500
Chapter 12, #12, p. 86. The calculation for the fixed rate in problem 16b left out multiplication by (360/180). The answer is correct. Thanks for my student Luke Lemoine for catching this one. Also, the calculations for the discount bond price for pounds have the wrong number of days. It uses 90, 180, 270, and 360 and should use 180, 360, 540, and 720. This is just a typo, however, as the correct number of days is used in the actual calculations. Thanks for Jennifer Pollet for catching this one.
Chapter 12, #14, last line should say "In all cases, the notional principal is 5 million x $20 = $100 million.
Last updated: February 13, 2006