Options, Futures, and
Other Derivatives, Seventh International Edition

New Features of International Edition:

The changes in the seventh international edition include:

1. A new chapter on derivatives markets in developing countries. This focuses particularly on China, India, and Brazil.

2. The chapter on credit derivatives has been largely rewritten. It explains the U.S. subprime mortgage crisis and its effect on world financial markets. It also provides more material on the valuation of CDOs.

3. Volatility indices (such as VIX), volatility swaps, and variance swaps are covered.

4. The material on volatility smiles has been expanded and the chapter on Greek letters has been restructured

5. Options on futures are now covered in a separate chapter from options on indices and currencies. There has also been some restructuring of the material. The chapter covering options on indices and currencies, first gives examples of how index and currency options can be used and then covers valuation issues. This makes the chapter flow better. The chapter covering options on futures, provides more details on how Black's model is used as an alternative to Black-Scholes for valuing a wide range of European options.

6. Issues associated with tailing the hedge are covered in Chapter 3. This resolves some minor inconsistencies between formulas in the book and those used by the CFA.

7. One small change has been made in the notation concerning the symbol f, which denotes a normal distribution. As is the usual practice, the second argument of f is now the variance rather than the standard deviation of the distribution.

8. New end-of-chapter problems and assignment questions have been added.

9. A new release of DerivaGem, is included with the book (Version 1.52). An installation routine is now provided with the software. This ensures that files are loaded into the correct directories, creates icons, and makes it easier for students to use the software.