Many people have played a part in the development of successive editions of this book. Indeed, the list of people who have provided me with feedback on the book is now so long that it is not possible to mention everyone. I have benefited from the advice of many academics who have taught from the book and from the comments of many derivatives practitioners. I would like to thank the students on my courses at the University of Toronto who have made many suggestions on how the material can be improved. Eddie Mizzi from The Geometric Press did an excellent job editing the final manuscript and handling page composition. Emilio Barone from Luiss Guido Carli University in Rome provided many detailed comments.
Alan White, a colleague at the University of Toronto, deserves a special acknowl- edgement. Alan and I have been carrying out joint research and consulting in the areas of derivatives and risk management for about 30 years. During that time, we have spent many hours discussing key issues. Many of the new ideas in this book, and many of the new ways used to explain old ideas, are as much Alan’s as mine. Alan has done most of the development work on the DerivaGem software.
It is sometimes hard for me to believe that the first edition of this book, published in 1988, was only 330 pages and 13 chapters long. The book has grown and been adapted to keep up with the fast pace of change in derivatives markets. Like earlier editions, this book serves several markets. It is appropriate for graduate courses in business, economics, and financial engineering. It can be used on advanced undergraduate courses when students have good quantitative skills.
Many practitioners who are involved in derivatives markets also find the book useful. I am delighted that half the purchasers of the book are analysts, traders, and other professionals who work in derivatives and risk management. One of the key decisions that must be made by an author who is writing in the area of derivatives concerns the use of mathematics. If the level of mathematical sophistication is too high, the material is likely to be inaccessible to many students and practitioners. If it is too low, some important issues will inevitably be treated in a rather superficial way.
I have tried to be particularly careful about the way I use both mathematics and notation in the book. Nonessential mathematical material has been either eliminated or included in end-of-chapter appendices and the technical notes on my website. Concepts that are likely to be new to many readers have been explained carefully and many numerical examples have been included. Options, Futures, and Other Derivatives can be used for a first course in derivatives or for a more advanced course. There are many different ways it can be used in the classroom. Instructors teaching a first course in derivatives are likely to want to spend most classroom time on the first half of the book. Instructors teaching a more advanced course will find that many different combinations of chapters in the second half of the book can be used.
I find that the material in Chapter 36 works well at the end of either an introductory or an advanced course. DerivaGem Software DerivaGem 3.00 is included with this book. This consists of two Excel applications: the Options Calculator and the Applications Builder. The Options Calculator consists of easy-to-use software for valuing a wide range of options. The Applications Builder consists of a number of Excel functions from which users can build their own applica- tions. A number of sample applications enabling students to explore the properties of options and use different numerical procedures are included. The Applications Builder software allows more interesting assignments to be designed. Students have access to the code for the functions. DerivaGem 3.00 includes many new features. European options can be valued using the CEV, Merton mixed-jump diffusion, and variance gamma models, which are discussed in Chapter 27. Monte Carlo experiments can be run. LIBOR and OIS zero curves can be calculated from market data. Swaps and bonds can be valued. When swaps, caps, and swaptions are valued, either OIS or LIBOR discounting can be used. The software is described more fully at the end of the book.
The software is available for download from www.pearsonhighered.com/hull with a Pearson access code, included with the book. Slides Several hundred PowerPoint slides can be downloaded from Pearson’s Instructor Resource Center or from my website. Instructors who adopt the text are welcome to adapt the slides to meet their own needs. Solutions Manual End-of-chapter problems are divided into two groups: ‘‘Practice Questions’’ and ‘‘Further Questions.’’ Solutions to the Practice Questions are in Options, Futures, and Other Derivatives 9e: Solutions Manual (ISBN: 978-0-133-45741-4), which is published by Pearson and can be purchased by students. Instructor’s Manual The Instructor’s Manual is made available online to adopting instructors by Pearson. It contains solutions to all questions (both Further Questions and Practice Questions), notes on the teaching of each chapter, Test Bank questions, notes on course organiza- tion, and some relevant Excel worksheets.
John C. Hull is a Professor of Derivatives and Risk Management at the Rotman School of Management at the University of Toronto. He is both a very well respected researcher in the academic field of quantitative finance (see for example the Hull-White model), and also the author of (among other works) two books on financial derivatives that have become market practitioners' standard texts: "Options, Futures, and Other Derivatives" and "Fundamentals of Futures and Options Markets". In 1999, he was awarded the Financial Engineer of the Year Award, by the International Association of Financial Engineers.