Text corrections
(Name in parentheses is the person who reported it)
P. 35, 9th line of second paragraph. Change "$1,650" to "$125". (Alex Tang of Morgan State)
P. 49, under "Questions and Problems" at the bottom. On 1f., add the sentence "The option matures in six months." (Stephanie Rauterkus, UAB)
P. 56, just before the second equation. The calculation of the seven day T-bill return of 0.000858 has an "=" sign after "100" that should be a minus. (Kris Trocki, Notre Dame)
P. 65, the paragraph that starts "Again consider two portfolios, A and B." At the end of the second sentence, it should read "present value of X(1 + r)-T. The minus sign on T is missing. (Charlie Shao, Derko Aerospace)
P. 78, second to last line of second full paragraph. The sentence reads "stock price can move can more than make up the difference." Remove "can move". (Xiaoqing Liang, Nanyang Technological University of Singapore)
P. 113, shaded equation. In the denominator, change "!j" to "j!" (Bruce Bagamery, Central Washington)
P. 118, 5th line from bottom. Change "$12.70" to "$12.6984" to be consistent with the four digits used in the answers of the related problems. (Bruce Bagamery, Central Washington).
P. 135, Table 5.1. The probability for 0.806 shows as 0.0851. It should be 0.8051.
P. 139, second line, in the exponent there should be a minus in front of rc. (Charlie Shao, Derko Aerospace)
P. 140, under "If ST > X," the superscript on the "r" in the exponential (3rd line) should have a superscript "c". That is, there should be rc for the superscript of the exponential function. (Julie Brouillette, University of Quebec at Montreal)
P. 151. Second line from bottom. Change "t" exponents to "T". (Bruce Bagamery, Central Washington)
P. 153, Table 5.4, Step 1. Change "t" exponent to "T". (Bruce Bagamery, Central Washington)
P. 165, Table 5.8, equation for Put Theta. There should be a minus sign in front of the first term. (Xiaoqing Liang, Nanyang Technological University of Singapore)
P. 118, Table 5.8. Change "Call Gamma" to "Put Gamma". (Bruce Bagamery, Central Washington)
P. 183, 3rd, 4th, and 5th equations (all dealing with puts). The call equations were mistakenly copied here. All of these equations should have Max(0,X - ST) instead of Max(0,ST - X). (Sylvain Leclaire, University of Quebec at Montreal)
P. 191, last paragraph, 5th line from bottom. Change X - C to X + C. (Christina Vo, University of Alabama at Tuscaloosa)
p. 205, first line of first full paragraph, " ... the higher is the profit, P" should have Π" (capital Pi) instead of P. (Christina Vo, University of Alabama at Tuscaloosa)
p. 224, second line under Bear Spreads. After "since" and before "and" insert "N1 = -1 and N2 = +1". (Christina Vo, University of Alabama at Tuscaloosa)
p. 232, first equation, insert a minus sign in front of ST*. (Christina Vo, University of Alabama at Tuscaloosa)
P. 236, second full paragraph. (a) Change "shortest" to "shorter", (b) change "tighter" to "slightly wider", (c) Change "115" to "110", (d) change "145" to "150", (e) change "110" to "109", (f) Change "145" to "147". (Bruce Bagamery, Central Washington)
P. 292, second equation, the exponent on (1 + r) should have a + sign. (John A Thywissen, the University of Texas at Dallas)
P. 296, first full paragraph. Both references to "r" (2nd line and last line) should be ρ (rho). (Keith Godfrey, University of Western Australia)
P. 297, gray shaded equation at the bottom. The minus exponent on T should not be there. (Keith Godfrey, University of Western Australia)
P. 312, last equation (just before Table 9.6). The negative sign in the exponent in front of T should not be there. (Xiaoqing Liang, Nanyang Technological University of Singapore)
P. 317, fifth line of the paragraph that starts "To prove ...". The "e" is missing from the second expression in that line. That expression should be identical to the first one on that same line. (Charlie Shao, Derko Aerospace)
P. 320, Table 9.10, formulas for discrete dividends for both forwards and futures. Remove the minus in the exponent in front of T (first line only, second line formulas are correct). (Alex Huang, Yuan Ze University)
P. 330, Table 10.2. There is some information missing at the top of the table in the Scenario section. This information should explain that the rate for 180 days is 8.75%, which is an effective rate of 9.07%, thereby explaining why the strategy, which generates a rate of 8.84%, is 23 basis points better. See this document for the exact statement. (Tsong-Yue Lai, Cal State Fullerton)
P. 332, Table 10.3. The spreadsheet used to calculate the conversion factors and invoice prices has a wrong date. The corrected table is here. (Tsong-Yue Lai, Cal State Fullerton)
P. 359, last line. Change "the spot price" to "zero". (Dave Smith, University of Albany)
P. 392, Table 11.14. Under "Futures Market" insert a negative sign in front of 1.10 (Bruce Bagamery)
P. 395, Table 11.15. In the lower part of the table, change "Price on August 29" to "Price on November 29". (Bruce Bagamery, Central Washington)
P. 413, second to last formula. In the denominator, change "(t1)" to "(t1 - t)" (Jaideep Chakravarthy). Also, in the paragraph directly above, change 1 - L0(t1) to 1 + L0(t1).
P. 426, Second column under Derivatives Tools. The second set of payments (217,500) should be labeled "Euro payments". (Bruce Bagamery, Central Washington)
P. 434, Table 12.9. Change L0(30) and B0(30) should be L0(90) and B0(90). On the second line, it should be L0(180) and B0(180). On the the fourth line it should be L0(360) and B0(360). (3rd line is correct) (Sameh Sakr)
P. 473, bottom paragraph, first line. Change "application of a swap" to "application of a swaption". (Bruce Bagamery, Central Washington)
P. 488, full paragraph at bottom, 7th line. Change "12.90" to "12.88". (Bruce Bagamery, Central Washington)
P. 522, Table 15.1, second to last line. It should say "Discounting for one year at 12.41 percent ..." (Xiaoqing Liang, Nanyang Technological University of Singapore)
P. 527, second set of centered equations. Change "$2,400" to "$2,500". Also, footnote 6, change $3.72 to -$3.72.
P. 532, second paragraph under Historical Method. Change "VAR is a loss of 5.1 percent." to "VAR is a loss of 10 percent."
P. 534, paragraph that starts "We might, however, ..." Change "0.9439" to "0.9430".
P. 536, second line. Change "twelve random numbers ..." to "twelve random numbers minus 6.0 ..."
P. 542, Second paragraph in Derivatives Tools, 6th line. Change "400" to "800".
P. 549, 10th line in Credit Linked Security. Change "both parties A and B." to "both parties B and C."
P. 591, equation for Put Theta. There should be a minus sign in front of the first term. (Xiaoqing Liang, Nanyang Technological University of Singapore)
P. 592, formula for Price of a Futures Contract on Dividend Paying Asset. Remove minus sign exponent in Discrete case. Also, in formula for Price of a Forward/Futures on Commodity, remove minus sign in exponent. (Xiaoqing Liang, Nanyang Technological University of Singapore)
Powerpoint Corrections
Ch. 10, p. 5. In the definition of Invoice Price, remove the slash (division sign). (Mike Hemler, Notre Dame)
Solutions Corrections
p. 6, Appendix 2A, question 1f. Change "... on all option purchase transactions." to "on all option purchase transactions if the expiration is less than nine months." (Stephanie Rauterkus, UAB)
p. 14, Problem 22. In the table under "Today" in the row labeled "Net", it should say "-S0 + D + X/(1 + r)-T = Pe. (Maxim Zobov, York University)
p. 21, Problem 14. The value of Sud should be "55.20", not "5.20". (Maxim Zobov, York University)
p. 30, Problem 16. In the formula for d2, the term under the radical sign should be "0.0274". (Maxim Zobov, York University)
p. 45, Problem 25, under Buy a Put, ST the second "-P" should not be there. (Maxim Zobov, York University)
p. 71, Problem 24. The (a) the future value of the dividends should be changed from 2.608 to 2.522. Then the futures price changes from 100.226 to 100.312. In (b), the futures price changes again and the cost of carry changes from 0.226 to 0.312. (Richard Shockley, Indiana University)
p. 68, Problem 14, part (b). At 960.50, it is "underpriced," not "overpriced." (Richard Shockley, Indiana University)
p. 68, Problem 16. Remove the superfluous information, "r = 0.0615, ρ = 0.0364". (Maxim Zobov, York University)
p. 88, Problem 21, last line. The total should be $20,374,500, not $20,400,000. (Richard Shockley, Indiana University)
P. 91, Problem 13. Add this to the third paragraph. "At this point, the manager will be paying a fixed rate in pounds. Since he wants a floating rate in pounds, he would then enter into a plain vanilla interest rate swap in pounds. He would pay a fixed rate of 4.9% and receive the floating rate in pounds, with a 30 million pound notional principal." (Kaji Dahal, Tribhuvan University, Nepal)
p. 119, Problem 14, 5th line. Change "credit default" to "total return." (Maxim Zobov, York University)
Last updated: December 2, 2009