Options, Futures, and Other Derivatives by Hull J.C.

By Hull J.C.

For undergraduate and graduate classes in derivatives, strategies and futures, monetary engineering, monetary arithmetic, and possibility management.

Bridge the distance among concept and practice.

This name is a Pearson international variation. The Editorial staff at Pearson has labored heavily with educators all over the world to incorporate content material that's in particular suitable to scholars open air the United States.

Designed to bridge the distance among idea and perform, this introductory textual content at the futures and recommendations markets is perfect for people with a constrained heritage in mathematics.

The 8th version has been up-to-date and improved—featuring a brand new bankruptcy on securitization and the credits drawback, and elevated dialogue at the method commodity costs are modeled and commodity derivatives valued.

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Extra resources for Options, Futures, and Other Derivatives

Example text

On March 5 a trader in New York might call a broker with instructions to buy 5,000 bushels of corn for delivery in July of the same year. , take a long position in) one July corn contract. ) At about the same time, another trader in Kansas might instruct a broker to sell 5,000 bushels of corn for July delivery. , take a short position in) one corn contract. A price would be determined and the deal would be done. Under the traditional open outcry system, floor traders representing each party would physically meet to determine the price.

Sometimes traders who have a mandate to hedge risks or follow an arbitrage strategy become (consciously or unconsciously) speculators. The results can be disastrous. 3). To avoid the sort of problems Societe General encountered, it is very important for both financial and nonfinancial corporations to set up controls to ensure that derivatives are being used for their intended purpose. Risk limits should be set and the activities of traders should be monitored daily to ensure that these risk limits are adhered to.

_- ........................................................ _ r Introduction 15 I . V - _ . ~ . . , _ . , - . » . ,.. 5 Profit or loss from two alternative strategies for speculating on a stock currently worth $20. 10°00 — Profit ($) 8000 — 6000 ~4000 — - - - Buy shares —— Buy options 2000 — O - _ . _ __;-,i—-I ' “ ’ - T ? - - . L 15 . - —-l . - - - -- 20 "2000 ' ' l 25 30 ' Stock price ($) -4000 — v__'__ - I ~ - - - » ~ V» - I > - - ~ _. I — - ‘ ' ~- ~ , 7 ;_-‘ . t....

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