| Page | Item
| | 23 | 2nd line: The current price is 1094.83, not 1094.44.
|
| 46, Fig 2.13 | The bottom value on the y-axis should be
-15,000. Also, it would be clearer for the x-axis label to read
"House price, end of period ($)"
|
| 51 | 1st line: should say "after 5 1/2 years, the buyer
has lost interest with a present value of"
|
| 78 | 1st line after 3.4: should say "collared stock"
rather than "collar"
|
| 96 | 1st line: Figure 4.4 shows the profit, not the payoff.
|
| 113 | 2nd line: "To offset the higher premium, we
could sell less than one call". ("Sell" replaces "buy")
|
| 132 | Last sentence, end of 2nd paragraph,
should say "exp(delta*T) times as many shares as we had initially."
|
| 138 | Last line of penultimate paragraph: the example
assumes that the transaction is cash-settled, not settled by
delivery (in which case there would be a bid-ask spread on the
stock).
|
| 139 | Delete the sentence below line below (5.11)
|
| 145 | First line in third paragraph,
"significantly" is misspelled.
|
| 186 | In Example 6.2, 5th line, 94.56 should be replaced
by 96.13.
|
| 198 | Last line: "stock hedge" should be "stack hedge".
|
| 200 | The definition of "Heating Degree Day" should be
"the maximum of zero and the difference between 65 degrees
farenheit and the average daily temperature." |
| 216 | End
of line above Example 7.3: "on day t" should be "on day t+s".
|
| 218 | On the third line from the top of the page,
"borrowing rate" should be "lending rate". |
| 218 | Second bullet on the page, replace "prepaid forward"
with "bond maturing at t2," |
| 221, fn 7 | The expected error should be divided by
1+r_{forward}, not 1+r_{forward}^2. This changes the
estimate of convexity bias to 614 instead of 603. |
| 226, Ex. 7.5 | In the displayed equation, the right-hand side
should be "3.000" instead of "-3.000". |
| 242 | Fifth line after "Bonds" head, "multiplying" is
misspelled. |
| 259 | Ninth line below Table 8.4: "swap payments in
June, September, and December (the months in which the quarterly
rate prevailing over the next 3 months is known" should be
"swap payments in September, December, and March (the months in
which quarterly payments are due for a 9 month loan initiated in
June)". |
| 262 | In equation 8.4, the limit of the summation
should be "n" rather than "T". |
| 264 | In the box about the
P&G swap, bottom of the first column: the spread evaluated to -.17,
which is -17 percent, not basis points. |
| 283 |
Second line below eq 9.2: "life of the stock" should read "life of
the option" |
| 294 | Equation (9.11). The term on the
left-hand should have "T-t" as an argument, rather than "T".
|
| 309 | Problems 9.17 and 9.18. Table 9.1 was updated
without the problem having been updated. The appropriately revised
problems are here.
|
| 316 | Footnote 2: the superscipt "Sh" should be a "delta
h"
|
| 344 | The early exercise condition rK>delta S is correct
only for infinitely-lived options. (The demonstration of this
condition is on pp. 566-567.)
|
| 380-381 Ex 12.3 | The example is correct as stated,
however, at the top of p. 381 there should be some discussion of
the appropriate volatility being that of the prepaid forward price,
S-PV(Div), rather than of S (this issue is discussed on p. 365.)
|
| 384-386 | Figures 12.1-4: The phrase "at-the-money" should
be deleted from the figure captions.
|
| 394, eq. 12.12 | In the denominator, the absolute value of
omega should be used (as in equation 12.9). The equation is correct
if omega>0 (a call) and the Sharpe ratio reverses sign if omega<0.
|
| 395 | The discussion uses omega_i to mean both quantity
and portfolio percentage. A corrected discussion is here
|
| 431 | Equation (13.11) applies for a
delta-hedged long call. To be consistent with the text there
should be a minus sign in fornt of equation (13.11)
|
| 431 | Footnote 5: "Variance" should be "standard deviation".
|
| 435, Figure 13.4 | The text should make clear that the
figure is drawn assuming an option on one share, unlike Figure 13.2,
which is drawn assuming an option on 100 shares. |
| 456 | Example 14.2: There are two corrections.
- The CallOnPut calculation should use
the prepaid forward price ($95.0987) as the stock price,
instead of $100. This gives a compound option value of
$1.7552. The correct value for the American option is therefore
$13.5325.
- The Black-Scholes value should be $11.764.
For more details, see an expanded
discussion of this section and example 14.2.
|
| 459 | First equation on page: K_t should be K_T |
| 459 | Equation 14.16: On the left hand side, "r" should
be "delta_K" and "delta" should be "delta_S"
|
| 466 | Appendix 14.A: The text should say that 1) The
pricing formulas for barrier
options are covered in Section 22.3 and 2) All of the options
discussed in this chapter have pricing
formulas (and VBA code) available in the spreadsheet
accompanying the book.
|
| 466 | In the last line, the expression for sigma^{**}
should not have a sqrt(T) in it. |
| 493 | Figure 15.1 "prepair" should be "prepaid"
|
| 502 | Problem 15.22: the bullet list should be enumerated
(i.e., as parts "a", "b", and "c")
|
| 506 | 1st paragraph, 2nd line: defaultable debt is
equivalent to owning a default-free bond and writing a put
option on the assets of the firm.
|
| 508 | Fourth line of text, "of the equity increases by
$0.735 and ..."
|
| 518 | Figure 16.4, Panel F. The value 5361.58 should be
italicized since the firm calls the bond. |
| 560 | The formula for "sigma hat squared sub t" right
below equation (17.3) should not have an H or H^2 in it. (By analogy,
if you were pricing an option to exchange one share of S for k
shares of Q, the option price would depend on the volatility of
the return difference between S and Q, and not depend on k.) |
| 594 | Figure 18.3. The gray line should be labeled
"N(0,1.5)" and the black line should be labeled "N(0,1)". |
| 600 | In the fifth and sixth lines below the heading
"Lognormal Confidence Intervals", the inequalities are
reversed. S_L is the lower bound and S_U the upper bound, so it
should read "Prob(S_t < S_L)" and "Prob(S_t >
S_U)". |
| 612 | Figure 18.6. In the bottom two panels, the
plotted distribution is normal with mean 3 and standard
deviation 5, not standard normal. |
| 618 | The
lower subscript on the summation in the middle of the page
should be zero instead of 1. |
| 655 | Equation (20.9) is an Ornstein-Uhlenbeck
process even when alpha is not equal to zero. |
| 657 | Last line: The covariance is rho*dt. The
correlation is rho. |
| 661 | Sixth line: it should read E[Z(t+s)|Z(t)]=Z(t) |
| 662 | Footnote 9, last equation. On the right-hand
side, "Z" should be "Z(t)"
|
| 757, Fig 23.6 | The legends are reversed. The dashed
line is realized volatility and the solid line is GARCH(1,1). |
| 779 | Sixth line from bottom: Duration is defined in
Section 7.3, not 7.8. |
| 780-788 | The corrected pages are here. The discussion of short-rate models needs a
few corrections. Equations 24.1 and 24.2 should have different
signs on the dZ term ((one positive, one negative), the reason
being that interest rates and bond prices are inversely
related. Suppose 24.1 is -qdZ (in which case 24.2 is
unaltered). This alters the sign on the dZ term in equation
24.12, which makes sense: P_r is negative, and we want
volatilities to be positive. So there should be a negative
sign preceding this expression. The signs on the dZ terms in
24.13 and 24.14 are likewise negative. The negative sign in
24.12 switches the sign on phi in 24.18 and 24.19. This gives
the same PDE as in Vasicek. With the switch in 24.18, rbar is
correct in 24.26.
The error affects the CIR solution. The sign on r*phi_bar in
the PDE is switched, and all occurrences of a+phibar should be
a-phibar.
|
| 783 | Equation 24.19: the dZ should have a tilde |
| 787 | In the definition of A(t,T) (second displayed
equation line below the line containing only "where"), the
"B^2 sigma^2" term should be "B(t,T)^2 sigma^2" |
| 787 | Line below equation 24.27: "variance" should be
"standard deviation". Same correction on the third
line above equation 24.28. |
| 787 | Line above equation 24.28: "risk premium"
should be "Sharpe ratio" |
| 789 | Figure 24.1. In the bottom panel, the fourth
tick mark should be "20", not "0". |
| 795 | Example 24.3, first line: "Figure 24.2" should be
"Figure 24.3" |
| 799 | Table 24.2, caption: "Volatility refers to the
volatility of the bond yield" (not "price").
|
| 800 | Fourth line: "time-t" should be "time-h". |
| 800 | Fifth line: It would be clearer to say
"The annualized yield of the bond is" |
| 800 | Equation 24.48: The right-hand side should be
divided by sqrt(h) in order to annualize the volatility. (This
doesn't affect any of the calculations, since h=1 throughout the
example.) |
| 800 | Figure 24.4. In Period 1, at the upper node an
equals sign is missing (should be R_u=R_h etc.) |
| 804 | The sixth line of text should say "Both yield
volatilities match ..." |
| 805 | In the caplets and caps example: 1) the loan
should be referred to as a 4-year loan, since (in
Fig 24.9) the final payment is made four years from
the initiation date. 2) the reference to "2-year
caplet" and "year-2 cap payment" should be changed
to "3-year caplet" and "year-3 cap payment" for
consistency with the caplet definition on
p. 792. |
| 910, 912 | The definitions of "heating degree day" and
"cooling degree day" are reversed.
|