Options, Futures, and Other Derivatives, 10th Edition¶
Hull, J. C. (2018). Options, Futures, and Other Derivatives, 10th Edition. Pearson.
Cited by¶
9 citations across 9 artifacts.
Each citation links to the sentence it supports in the citing article.
Primes¶
- Contact-Response Decomposition
- Control and signal processing: output = input × gain; disturbance rejection acts either on the input (filter, shield) or on the per-unit gain (attenuate, notch). Finance: position risk = size × sensitivity (delta, duration, beta); hedging acts on either side.
This sourceDefines position risk via sensitivity measures (delta, duration, beta) times exposure, and hedging acting on either factor.
- Control and signal processing: output = input × gain; disturbance rejection acts either on the input (filter, shield) or on the per-unit gain (attenuate, notch). Finance: position risk = size × sensitivity (delta, duration, beta); hedging acts on either side.
- Future Or Promise
- In finance it is futures contracts (a standardized obligation to deliver at a fixed date and price), forwards, options as conditional futures, and insurance claims as conditional fulfillments.
This sourceStandard reference on futures and forward contracts as standardized obligations to deliver at a fixed date and price, clearinghouse enforcement, and options as conditional claims.
- In finance it is futures contracts (a standardized obligation to deliver at a fixed date and price), forwards, options as conditional futures, and insurance claims as conditional fulfillments.
- Optionality
- A financial analyst reasoning about option exercise windows ("Should we exercise the call before expiration?") is using the same logic as a career counselor reasoning about skill development ("How long can she defer specialization before her option to pivot expires?") or a product manager reasoning about feature development ("At what point do we commit to a customer interface design, vs. keeping it modular?"), all using the same option-pricing logic systematized in Hull's (2017) standard reference.
This sourceStandard graduate textbook on derivative pricing and option theory; systematizes the reasoning about payoff asymmetry, path dependence, time value, and exercise timing that transfers across financial and non-financial decision contexts.
- A financial analyst reasoning about option exercise windows ("Should we exercise the call before expiration?") is using the same logic as a career counselor reasoning about skill development ("How long can she defer specialization before her option to pivot expires?") or a product manager reasoning about feature development ("At what point do we commit to a customer interface design, vs. keeping it modular?"), all using the same option-pricing logic systematized in Hull's (2017) standard reference.
- Proxy-Target Divergence
- In finance, basis-risk failure decouples a hedging instrument from the hedged exposure under stress, and parametric catastrophe-bond triggers fire on wind speed but not insurable loss.
This sourceDefines basis risk and the cross-hedge (Ch. 3): a hedge built on a correlated proxy instrument (e.g., heating-oil futures for jet fuel) fails when the basis widens under stress.
- In finance, basis-risk failure decouples a hedging instrument from the hedged exposure under stress, and parametric catastrophe-bond triggers fire on wind speed but not insurable loss.
- Random Walk
- The prime's √n dispersion law is the working tool of risk management: because return variances add under independence, the volatility of a holding scales with the square root of the horizon — the "square-root-of-time" rule used to convert daily volatility into monthly or annual risk and to size value-at-risk limits.
This sourceStandard reference for the 'square-root-of-time' rule: under independent returns, volatility scales with the square root of the holding horizon, used to size value-at-risk.
- The prime's √n dispersion law is the working tool of risk management: because return variances add under independence, the volatility of a holding scales with the square root of the horizon — the "square-root-of-time" rule used to convert daily volatility into monthly or annual risk and to size value-at-risk limits.
- Risk Transfer
- In finance, futures, forwards, options, and credit-default swaps transfer specific price, rate, or default risks to counterparties with offsetting exposures or appetite.
This sourceStandard reference on how futures, forwards, options, and credit-default swaps transfer price, rate, and default risk to counterparties.
- In finance, futures, forwards, options, and credit-default swaps transfer specific price, rate, or default risks to counterparties with offsetting exposures or appetite.
- Validity-ending Event
- In finance it is option expiry, contract termination, and insurance lapse, where the expiry of an option is precisely a validity-ending event with an automatic clock-based trigger and a defined post-expiry treatment.
This sourceOption expiry as a clock-triggered validity-ending event with a defined post-expiry treatment.
- In finance it is option expiry, contract termination, and insurance lapse, where the expiry of an option is precisely a validity-ending event with an automatic clock-based trigger and a defined post-expiry treatment.
Domain-specific¶
- Black–Scholes Model
- Backward, it is inverted to extract implied volatility, the σ that makes the formula match the observed market price, which has become the primary market-quoted measure of option-market sentiment and risk expectation
This sourceImplied volatility, the volatility backed out of option prices, as the market's gauge of expected volatility.
Supported in partVerified against the source
- Backward, it is inverted to extract implied volatility, the σ that makes the formula match the observed market price, which has become the primary market-quoted measure of option-market sentiment and risk expectation
Mechanisms¶
- Hedging Overlay Contract
- Its central failure mode is basis risk — the hedge tracks an index or reference price, not the pool's actual loss, so a hedge that looks matched can pay too little or at the wrong time when the reference and the real exposure diverge.
This sourceDefines basis risk as residual hedge risk caused when the price of the asset being hedged and the price of the futures or reference contract do not move together as expected.
- Its central failure mode is basis risk — the hedge tracks an index or reference price, not the pool's actual loss, so a hedge that looks matched can pay too little or at the wrong time when the reference and the real exposure diverge.
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