Errata, Derivatives Markets 3rd Edition

3rd edition cover

Errata and comments

Location Description Severity: 1 (low) to 5
Acknowledgements Bjarne Astrup Jensen made many helpful comments 1
P. 13 "International Accounting Standard Board" should be "International Accounting Standards Board" 1
P. 17 Box 1.2, 2nd paragraph: "Convention" should be "election", and "If you sold all four" should be "If you sold both" 2
P. 161 Appendix, title should be "Taxes and the Forward Price" (not "rate") 1
pp. 546 - 562 In Chapter 18, both lowercase z and uppercase Z are used to represent a standard normal random variable. For clarity, all should be uppercase: 546 (3rd displayed expression, 3rd line from bottom); 547 (figure 18.2, two occurrences); 548 (first three unnumbered equations and eq 18.4); 549 (eq 18.7 and example 18.2 (two occurrences)); 554 (second sentence above eq 18.21); 555 (first sentence below example 18.4); 557 (2nd line from bottom); 562 (first two displayed equations in sect 18.5) in chapter 20 (see 20.39). 2
p 565 The term "kurtosis" can mean either (E[(x-mu)^4]/sigma^4) (as defined in the book) or (E[(x-mu)^4]/sigma^4)-3, which is how it is typically defined in spreadsheets and many statistical packages. Using the second measure, also sometimes called "excess kurtosis", the kurtosis of the normal distribution is zero. 2
p 567 In Figure 18.5 the sample data points are on the y-axis. The text presumes that data points are on the x-axis, so the x and y-axis should be reversed in the figure. Corrected plots are here (eps) and here (pdf). plots. 2
p. 5884th line from bottom: The reference should be to equation (19.9) instead of (19.10).
p. 596See the entry for p. 565 regarding the definition of kurtosis
p. 558 third line from bottom, 62.09 should be 60.09 3
p. 618 Eq 20.29 should have no tilde over the Z and eq 20.30 should have a tilde over the Z
p. 622 Equation 20.39 and line after, dz should be dZ (three occurrences)
p. 623 There should be a Greek delta subtracted from alpha in eq 20.42 and in the displayed equation for dS/S below. 3
p. 643 There should be a Greek delta subtracted from alpha in eq 21.38. 3
p. 888 Definition of "heat rate": "kilowatt/hour" should be "kilowatt-hour" 1

Spreadsheet

Date Problem Fixed Version
November 27, 2013 Binomial and perpetual option calculations exhibited errors for extreme values of inputs (e.g., very low volatility) optall3a.xls