Errata Sheet for Financial Derivatives: Markets and Applications Second Edition

Page 33, Table 3.3, Column—Margin Account Balance , 0 day should be 1,200
Page 48, Question 12, Line 4, market losses should be market inflows
Page 52 Section II, Table, Column—Action, Line 3, [(1,013.63x25)x21]should be [(1,013.63x25)x2]
Page 62, Line 7 workings should be
1,000 pts x RM50 =RM50,000
Cost per ling position =RM 30
Transaction cost as % of value (RM30/RM50,000)X100=0.06%
Page 66, Scenario 2, Column—Action, Line 3 Borrow 120,000 should be Borrow 60,000
Page 67, First Table, Item ii) Short Spot Position Today should read 60,000, Item iii) Lend RM60, 000@ 4% for 90 days,
Item iv) Borrow RM 300 @4% to replace divs, Position Today should be blank.
Page 68, Section a) 12x1.2=12 contracts should be 12x1.2=24 contracts
Page 85, paragraph 2, line 8, Short 6 should be Long 6
Page 86, Table—Cash & Carry Arbitrage with SSF, Column—action I, short 1SIF should be short 10SSF
Page 90, Question 8, Line 6 RM 100 should be RM 50
Page 109, Paragraph Result of Hedge, Line 8, workings should be
Total earning =RM 50,000+RM 50,000
=RM 100,000
Page 112, Scenario 2, Line 9,-RM 1,250 should be RM 1,250
Page 127 In Simplified Bank Balance Sheet, under liabilities last line should read total liabilities
Page 128, Duration of Liabilities Line 2 should be
=(0) + (0.2) + (1.6)
Page 136, Table 6.1, Column—(P/L) payoff, Line 1,(0.50) should be (2.50)
Page 163, Illustration under 7.4 Intermediation and Margining the arrows should be

Option Buyer Exchange Option Seller

Page 164, Figure 7.1 (a) Line 2 Long KLCI 850 put should be Long KLCI 850 call
Page 178, Table 8.2, Column 2, Value of Long Stock Position should be Value of Short Stock Position, Column 3, Profit/Loss to
Long Put Position should be Profit/Loss to Long Call Position
Page 183, Figure 8.4, P/L axis, Short call 0.5 should be 0.05
Page 187 Last Table, Column—Break-Even Point for Bear Call, price-difference should be price+ difference
Page 197 Table 8.12, Column Proft/Loss to Short 7.50 @0.10 should be Short 7.50 call @ 0.10
Page 198 Line 7, 17.93 should be 17.38
Page 198 Line 11, 8.696 should be 8.686
Page 209, Table—Payoff to Call Ratio Spread (2:1) P/L axis, 90 should be 0.90
Page 220, Figure 9.5, Line 1 Call Value should be Put Value
Page 220, Second paragraph, Line 3 workings should be
P3= [ (0) +……[0], + [(0.125x3) (RM 1.09)+[(0.125)(RM2.710)]
Page 221, Figure 9.6, Line 1 Call Value should be Put value and Call Payoff should be Put Payoff
Page 227, Line 15, Step 3, workings should be
C=RM11(0.7291)-RM10.e (-0.10x0.25).(0.6406)
Page 228, Line 11, N(-d2) should be N(d2)
Page 228, Line 12, workings should be
N(-d2)=1-N(d2)1-0.6406=0.3594
Page 246 footnote toTable 9.7, Line 2
Note: N’(d) is determined as = e-d i2/2

2

Page 248, Line 11, 12,13 and 14 RM 4.68 should be RM 4.98.

Page 248, Line 15 and 16, 0.5657 should be 0.602
Page 264, Line 9, 20 sen should be 24 sen
Page 278 Illustration in paragraph 4 should be as follows
RM 10 mil
Prob.=0.05
RM 1 mil Prob.=0.95
0
Page 307 Last Paragraph Line 10, country should be currency
Page 319 Question 7, Line 8, The 3-month KLIBOR is now 4.5%, while the 3 month futures is at 95.0, En Aman wants to lock-in
the current cost of 7.5%
Page 320 Line 2, 7% should be 7.5%
Page 320, Line 5, lock-in-the 7% cost should be lock-in-a 7% cost of funds
Page 321, Question 14, Line 6
Time 6-Month Libor
0.5 5.25%
1.0 5.5%
1.5 6%
2.0 6.2%
2.5 5.44%
Page 339 Question 10, Line 4, Answers should be Profit from Long SIF=RM1,418, Loss on short spot 1,250, interest earned on
lending =RM369.50, replace borrowed dividends=(RM164.06): so arbitrage profit=RM371.82
Page 340,Chapter 7, Question 7 Put IV=.10 should be Put TV .10
Page 340 Chapter 8, Question 5a) straddle position should be strangle position , Question 7b)RM7.70 (Break-even), Max
Profit=RM0.70, Max Profit RM 0.30
Page 343, Question 21, Long 800 should be Long 400