I started not knowing a "put" from a "call," but I needed to know a fair bit about how financial engineers (coming from a family of PEs, I'm still not used to that term) use math. This has been the introduction I wanted - not the advanced stuff, but enough to help me understand that material.

Methodical pacing leads the reader gradually through the basics, from just what a derivative is on through the brief story of how futures markets work - in short, they abstract buying and selling into buying and selling the right to buy and sell. I tend towards the concrete, so many of these transactions seemed a bit airy to me. Oh, I can follow the reasoning well enough, but I just never saw where the satisfaction of the thing solid and completed comes in. As it turns out, it doesn't. Once you've really got that in the pit of your stomach, then Hull's presentation follows smoothly.

He gradually derives models of increasing complexity. Diligent reader with a little calculus or a lot of trust will follow along easily. Later chapters draw on more advanced concepts in probabilistic modeling, but present the reader with only the aspects needed for the discussion at hand - a mercy, considering the size of the specialized vocabulary involved in the rest of the explanation.

This book ends when the foundation has been built. More advanced needs must be met with other sources - not a problem with this text, just a matter of its chosen scope. I needed that foundation, however, so I recommend this book to anyone with reasonaable math skills and a need to know the material.

-- wiredweird, reviewing the 6th edition

I started a course in Financial Engineering last year and this book has given me all the grounding I need.

Pros:

* Very in-depth treatment of derivative basics, e.g. call, puts, swaps, forwards, futures.
* Many, many examples to complement the material.
* Many good practice problems to help further your understanding.
* Covers binomial, Monte Carlo and Black Scholes pricing of options very well
* Industry standard textbook - all the professionals use it.


I can't think of many negatives for the book. So if you're a student of finance, go get this book!

If you are a total beginner, like I was 6 months ago, then you might want to tear your hair out when reading this book. I found the description of interest rates quite confusing. I would suggest you start with The Wall Street Journal Complete Money and Investing Guidebook (The Wall Street Journal Guidebooks) and then move to All About Derivatives (All About) and Investment Science. From then on it's quite a good book, but the mathematics is very cavalier (and would you trust someone who tells you that Pi is 3.14162?). Now that I have read a lot of these primers, I actually like Hull's book and find that his treatment of the Ito calculus, while lightweight is a good place to start before going on to a solid foundation.
I can't say anything about the numerical methods because it's not my field yet.

The best introductory/intermediate textbook for students of finance. Not overwhelming to read, but, of course, you still need to know some math.

I needed this adapter to run my itty bitty book light. It arrived and I tried to use it and it worked as expected. No better, no worse. I'm a happy customer!

This is one of those books definetely worths its price. Also Netfci's book "Introduction to the Mathematics of Financial Derivatives" could be very good background reading for this book that outlines modern asset pricing theoory.

Very well written with clear explanations, lots of examples, and keeps the math at just the right level- digestible and intuitive but without sacrificing advanced methods. Ties in the math and finance/econ aspects seamlessly. Lots of exercises with just the right level of difficulty to help the reader practice and learn. I like that it has a student manual to give answers to some problems - then you can check your work. I am using this as an intro to the field, but I can tell it will also be my main reference for years to come.

The book is very useful for somebody who wants to know more about derivatives. It was 3 times cheaper than in the libaryr - it was a good deal, and I got it in something like - 2 days... I definitely want to keep this book and read it from cover to cover some day :):)

The author did NOT explain thing clearly sometimes, I recommend Robert McDonald's book: Derivative Markets. It explains things more clearly.

The book was in great condition. It took only five days to get the book.

Whilst this text was not a recommended text for my Australian investments course, it was more useful than any other reference material prescribed by my professional body and proved more than its value over the space of just a few weeks. I encourage especially those that may be sitting on the fence, thinking it is a lot of money (because it is), that this text is worth every cent if you are in need of the best derivatives pricing book that exists today - this is it.

This textbook has been very helpful for my financial instruments class (MBA level). Good examples and explanation of formulas.

I am in the first few chapters and finding the book easier to read than other financial books. I like the examples to explain the purpose of futures and options. The first few chapters introduce you to futures and options then gets into more advanced topics. I also got the student study guide. There are certain books that are well worth the price, this is one of them. It is not a "get rich quick" guide, but rather a book designed to give the reader an in depth understanding.

Like all too many PhD students trying to push their way into the already overcrowded quant. finance job-space, I too had heard that Hull is the "bible" of quant. finance, and it should be the first book you should read.

WRONG. Dead wrong. Hull should be the LAST book you should read, and I mean it literally. That is, you definitely SHOULD read Hull, but after reading some good quant. finance books and getting some intuition behind what is going on.

The good parts of Hull are:

1) breadth of topics covered - there is no other single book that covers the range of topics that Hull does.
2) some amount of feel of real markets that it gives (all this means is that it describes the mechanics of markets).

For someone just starting out learning quant. finance, however, the above two become big stumbling blocks. The breadth of topics means that several topics are covered in a, and I am being kind, patchy manner. In fact, you can go through quite a lot of Mr. Hull's babble about "worlds" (something he uses interchangeably for "measure") without understanding whatever the heck a risk-neutral measure is. There are risk-neutral worlds, forward-neutral worlds, stock-worlds...and you don't know the underlying simple, simple principle, so you just keep following him, and he goes on and on...

Another example - Black's formula in fixed income products - he just goes on and on about its applications to this that and the other (bond options, swaptions...), discusses the "validity of Black's formula" (which supposedly tells you that it is more general that it is usually believed to be, but tells you neither how general it is, nor how general it is believed to be)...All this without giving you the simple, one sentence reasoning behind the Black formula.

Time and again in the book there are formulae that seem to be just pulled out of thin air. There are better compilations of formulae (Haug, for example), so I don't quite understand what the idea is. You keep wondering HOW a valuation formula came about, because you want to know what assumptions lie behind that valuation, and how to change it if some of those assumptions change...But as frequently as not, you will be left turning pages in the vain hope of trying to find out.

Add to that a poorly composed index, ill defined terms sprinkled all over the book, hand-waving galore, and it equates to hours of frustration. Just understanding clearly what is being talked about takes a lot of page turning, searching for definitions and so on.

And don't go by people who look down folks wanting to be precise. I am not talking about any ivory tower precision - I am talking about real, practical precision. The precision you need in a book to be able to answer a non-rote question properly. That precision is not there in most of Hull.

Like all too many PhD students trying to push their way into the already overcrowded quant. finance job-space, I too had heard that Hull is the "bible" of quant. finance, and it should be the first book you should read.

WRONG. Dead wrong. Hull should be the LAST book you should read, and I mean it literally. That is, you definitely SHOULD read Hull, but after reading some good quant. finance books and getting some intuition behind what is going on.

The good parts of Hull are:

1) breadth of topics covered - there is no other single book that covers the range of topics that Hull does.
2) some amount of feel of real markets that it gives (all this means is that it describes the mechanics of markets).

For someone just starting out learning quant. finance, however, the above two become big stumbling blocks. The breadth of topics means that several topics are covered in a, and I am being kind, patchy manner. In fact, you can go through quite a lot of Mr. Hull's babble about "worlds" (something he uses interchangeably for "measure") without understanding whatever the heck a risk-neutral measure is. There are risk-neutral worlds, forward-neutral worlds, stock-worlds...and you don't know the underlying simple, simple principle, so you just keep following him, and he goes on and on...

Another example - Black's formula in fixed income products - he just goes on and on about its applications to this that and the other (bond options, swaptions...), discusses the "validity of Black's formula" (which supposedly tells you that it is more general that it is usually believed to be, but tells you neither how general it is, nor how general it is believed to be)...All this without giving you the simple, one sentence reasoning behind the Black formula.

Time and again in the book there are formulae that seem to be just pulled out of thin air. There are better compilations of formulae (Haug, for example), so I don't quite understand what the idea is. You keep wondering HOW a valuation formula came about, because you want to know what assumptions lie behind that valuation, and how to change it if some of those assumptions change...But as frequently as not, you will be left turning pages in the vain hope of trying to find out.

Add to that a poorly composed index, ill defined terms sprinkled all over the book, hand-waving galore, and it equates to hours of frustration. Just understanding clearly what is being talked about takes a lot of page turning, searching for definitions and so on.

And don't go by people who look down folks wanting to be precise. I am not talking about any ivory tower precision - I am talking about real, practical precision. The precision you need in a book to be able to answer a non-rote question properly. That precision is not there in most of Hull.

Like all too many PhD students trying to push their way into the already overcrowded quant. finance job-space, I too had heard that Hull is the "bible" of quant. finance, and it should be the first book you should read.

WRONG. Dead wrong. Hull should be the LAST book you should read, and I mean it literally. That is, you definitely SHOULD read Hull, but after reading some good quant. finance books and getting some intuition behind what is going on.

The good parts of Hull are:

1) breadth of topuic covered - there is no other single book that covers the range of topics that Hull does.
2) some amount of feel of real markets that it gives.

For someone just starting out learning quant. finance, however, the above two become big stumbling blocks. The breadth of topics means that several topics are covered in a, and I am being kind, patchy manner. In fact, you can go through quite a lot of Mr. Hull's babble about "worlds" (something he uses for "measure") without understanding whatever the heck a risk-neutral measure is. There are risk-neutral worlds, forward-neutral worlds, stock-worlds...and you don't know the underlying simple, simple principle, so you just keep following him, and he goes on and on...

Another example - Black's formula in fixed income products - he just goes on and on about its applications to this that and the other (bond options, swaptions...), discusses the "validity of Black's formula" (which supposedly tells you that it is more general that it is usually believed to be, but tells you neither how general it is, nor how general it is believed to be)...All this without giving you the simple, one sentence reasoning behind the Black formula.

Add to that a poorly composed index, ill defined terms sprinkled all over the book, hand-waving galore, and it equates to hours of frustration. Just understanding clearly what is being talked about takes a lot of page turning, searching for definitions and so on.

And don't go by people who look down folks wanting to be precise. I am not talking about any ivory tower precision - I am talking about real, practical precision. The precision you need in a book to be able to answer a non-rote question properly. That precision is not there in most of Hull.

Though now I've learned some derivatives pricing, I still have difficulties understand why after 6th edition of this book appeared, the 5th edition's price skyrocketed? Can anyone teach me?

There are certain books that are well worth the price, this is one of them. It is not a "get rich quick" guide, but rather a book designed to give the reader an in depth understanding.

There are certain books that are well worth the price, this is one of them. It is not a "get rich quick" guide, but rather a book designed to give the reader an in depth understanding.

I am in the first few chapters and finding the book easier to read than other financial books. I like the examples to explain the purpose of futures and options. The first few chapters introduce you to futures and options then gets into more advanced topics. I also got the student study guide.

This is NOT a paperback edition of John Hull's "Options, Futures, and other Derivatives". This item is just a stupid notebook.
All other reviews on this page are related to Hull's book, and have nothing to do with this item.

The great strength of this book is its clarity of exposition. Basic principles of derivatives theory, such as no-arbitrage pricing and risk-neutral valuation, are presented in a completely intuitive way. The mathematical apparatus used is systematically stripped down to its essentials, which allows the reader to quickly grasp the key assumptions underlying various models without becoming bogged down in excessive rigor. Those interested in a deeper understanding of the technical details will in any event soon realize that they need to obtain specialized training in mathematics and statistics. Neftci's Introduction to the Mathematics of Financial Derivatives provides a good overview of the relevant topics; and there are any number of excellent mathematics texts that can be consulted for a fully rigorous exposition. Hull's book also provides a good introduction to the structure of derivatives markets in the US. However, readers will not find much information on how derivatives trading operations are organized, and on how traders apply quantitative techniques in their day-to-day operations. Derman, in his memoirs, gives a good flavor of the state of play through about 2003.

Hull is the one stop shop for learning (and using as a reference once you have learnt "it") almost any topic in Quant Finance. This book really has it all - options, interest rate models, volatility modeling, credit derivatives, you name it. However, use it as an introductory book - learn the main concepts from here and then move on to advanced books. As a current student of quant finance, I find Hull's book to be indispensable.

I recently entered the field of quantitative finance from physics, and this book has been by far the best resource as both a learning tool and reference. Its bredth of coverage is outstanding, covering topics as simple as bond yields and zero rates, to sophsticated libor market models, weather derivatives, bermudan swaptions, etc. While a bit wordy at times, Hull does present all the mathematics in a tractible manner. Books with more mathematical sophistication, such as Brigo & Mercurio, while interesting, are far less useful on the trading floor.

With each chapter Hull presents several "Business Snapshots" providing practical real life illustrations. Overall, this is a great purchase someone with a quantitive background new to finance.

Insightful, shines with intuition, easy to follow. Good start point, inspire further study, and visit it regularly you'll get more.

Explanations are fine, practice questions can be very technical. Not sure of the purpose of "assignment questions". Should only get if you're required because of school.

I actually learned a lot math and physics from finance AFTER I earned my PhD in physics and started working as a senior analyst at a Houston based energy firm (NOT ENRON), and Hull's wonderful book got me started in econophysics, or econometrics as it is often called.

Before Hull's book, I truly knew diddly about financial markets and derivative instruments. Hull gets you started by giving the reader the ins and outs of the various types of options markets, carefully defining terms and explaining business procedures. He then builds up the statistical concepts necessary to estimate the variance of stock price returns, the Ito stochastic calculus, and finally proceeds on to the Black-Scholes-Merton (BSM) partial differential equation (PDE) and its analytic solution for pricing European options. American options follow, which can be solved by various means, e.g., binary trees, Monte Carlo methods, and numerical methods. There are then several chapters expounding on options trading strategies such as straddles and strangles and so on. Some treatment of exotic (beyond plain vanilla) options is also developed.

I thought the material on Variance at Risk (VAR), the volatility smile, the term structure of interest rates and so on are lucid. Throughout the latter part of the book, the BSM equation and solution methods are extended to other market instruments such as those traded at the LIBOR.

Critiques:

1. I thought Hull's developement of Martingales is too cursory.

2. When I wanted to actually code numerical PDE solutions (or trinary trees equivalently) I found I needed to use other texts such as Wilmott's Option Pricing book.

3. Wilmott's book shows how one can transform the heat PDE equation into the BSM equation. This is amazing: from diffusion physics a connection is found to finance! And a connection, by turning t to it can be found to the path integral methods of quantum field theories.

Notes for the doctoral physicist:

Beyond the standard graduate semester of thermodynamics and statisical mechanics, I found by studying finance that there was much to statistical mechanics I truly hadn't mastered.

1. To understand the variance and expectation parameters of the BSM equation, it is important to understand the concept of propagation of errors. I honestly believe that many experimentalists don't have a real grasp of this concept.

2. Solving stochastic PDEs is not part of the standard background of a PhD in physics. Those whose speciality requires solving stochastic PDEs use the Monte Carlo methods developed at Los Alamos during WWII. But there are other, more formal methods available outside of Monte Carlo, such as the Ito calculus which is built from graduate probability theory. Prior to my PhD in physics, I earned an MS in math (non-thesis, 36 hours). I learned a bunch of seemingly dry and useless measure theory (Rudin; 'little' Royden; Royden), precious little of which is even mentioned in the standard year of graduate quantum mechanics. BUT when I ran into graduate probability texts that developed the Ito calculus, I realized all that measure theory, redressed as probability theory, made a helluva lot of sense. One of the central themes is how to integrate a stochastic function.

3. The history of finance and physics actually goes back to the turn of the previous century, about the time Einstein was working on Brownian motion. The BSM equation is the tip of the iceberg of stocastic PDEs in finance: there are, for example, reversion to mean stochastic PDEs used in pricing electricity and so on.

4. Our (physicist) way of looking at time series and parameter estimation (usually Fourier methods) are limited. Look up autoregressions and heteroscedasticity, ARIMAs, ....

Alex Alaniz Ph.D.

1. Please see the reviews of my own strong science fiction book: Beyond Future Shock about the near-terms perils and promise of advanced bio/nano technology in a world still roiled with Middle Age religious conflict and ever growing extreme wealth gradients.

2. I have REVIEWED many books from undergraduate to graduate in: PHYSICS, MATH, ECONOMETRICS, and HISTORY among other areas.

Hull is known as THE expert on the options and derivatives. I found the book easy to read and the examples are insightful. However, the book is not meant for skimming. One needs to focus on the material or important insight will be missed. I have had to re-read some portions of the chapter to completely understand what Hull is saying.

Was expecting a book that really helps fairly new readers to the concepts of financial engineering. This book is not well written and throws the reader into a lot of topics without any real-world, practical examples. A much, much, much, better book is Investment Science by Luenberger. Get that book. It kicks Hull's ass.

The book "Options, Futures and Other Derivatives" is for me the best book out there for Finance majors and professionals. I haven't finished the book but I feel confident now to review it. The structure and presentation of the book feels right, it starts with an introduction to Forwards, Futures and Option contracts and it later builds slowly on the mechanics of markets and the determination of their prices. Then it moves to more complex instruments and subjects (in my opinion) like the pricing of these instruments (Black & Scholes, Binomial Trees, etc.) and some risk management instruments like Value at Risk. In synthesis this book is a most have for any finance major or professional. There is not much I can say that it hasn't been said before. This book is the one that will give any student the necessary foundation to dwell into the more advance topics and pricing calculations. The only thing, I would like to recommend is that this book could be used with the Financial Toolkit of Matlab. It is a great teaching combination in my opinion. Currently my work prohibits me from teaching but if I could I would give classes of Derivatives using this book (+) Matlab. I think it is a nice combination and it helps students that don't have the necessary mathematical background to understand it right away. John C. Hull is one of our most valuable authors we have in the Financial Industry and his book should always be regarded as a jewel of finance.

It is not surprising that Hull's book is the standard text in introductory graduate derivatives courses. You clearly see a no nonsense format in his book that is the same for all serious finance books (i.e. black text on a white background with only shades of gray). Being an intro book, he jumps steps in some of the more challenging derivations for the beginner like in the Black-Scholes options pricing model and doesn't discuss Ito calculus in much detail. However, there are clearly books that focus on those topics and they are clearly more advanced than for an intro course. This book is a definite must buy.

Although John Hull's book "Options, futures, and other derivatives" is considered by many to be the bible for understanding derivatives , I think this book took the same shortcut that many books on this topic have taken. That is, they've focused on options where the underlying asset are stocks, exclusively. I suppose Hull's reason was to simplify an already complex topic. Yet, as a recent graduate with a degree in economics, I was hoping to find more information on options with commodities future contracts as the underlying asset. The book is fairly easy to follow. the dialogue is interesting without being boring. However, if your interested in a beginning book about derivatives, look somewhere else. If your interested in a book about derivatives that offers strategies, some useful math, and bases most of the discussion around stocks, this book might just be for you.

The author has written a nice, lively elementary text on mathematical finance. This book can serve as a excellent launching point into the topic. For the next step in the reader's development, I recommend the very good intermediate level treatment by Bjork in "Arbitrage Theory in Continuous Time" 2nd edition. As a capstone for advanced study, I recommend the advanced treatment of Musiela and Rutkowski's "Martingale Methods in Financial Modeling.

Hull starts out his 5th edition with several chapters on the basics of the derivative contracts in his study. The contracts introduced are forward and futures contracts, interest rate swaps, and equity options. The basic definitions of each contingency contract is given, as well as characteristics of the markets where these contracts trade. Some basic trading strategies are also studied.

The study of the option pricing model problem begins in earnest in Chapter 10. The section on one-step binomial tree model leads to a very intuitive description of risk-neutral valuation.

Chapter 11 introduces continuous time stochastic processes in a very intuitive setting. To avoid the hard-core Ito calculus, the author motivates the stochastic differential by considering difference equations. This is a nice technique and makes the material accessible to the beginner. The next highlight is a statement of Ito's lemma. This is not given in full generality, but only stated precisely as needed for Black-Scholes calculations. The appendix gives an intuitive motivation for Ito's lemma based on the multi-dimensional Taylor's formula.
This is a nice illustration as Taylor's formula is indeed a component of the formal semi-martingale based proof of Ito's rule. See for example Oksendal, "Stochastic Differential Equations" Chapter 4, or Karatzas & Shreve "Brownian Motion and Stochastic Calculus, Chapter 3.

Chapter 12 is devoted to the Black-Scholes-Merton theory of option pricing. The famous Black-Scholes PDE is derived via Ito's rule and application of a delta hedge. The author doesn't directly solve this PDE (via the standard application of the Feyman-Kac formula). Instead a nice proof of the option pricing formula is established in the appendix based on a simple log-normal distribution argument.

Chapter 13 discusses option pricing in for other contingency contracts. In Chapter 14, we return to equity options by studying the Greek letters. The reader discovers the Greek letters can be thought of as coefficients of the Black-Scholes PDE and learns some elementary hedging techniques.

Chapter 15 discusses implied volatility and volatility smiles. It is here that the astute reader gets his first indication that the Black-Scholes theory for option pricing may not be as robust or "true to market" as the reader may have been lead to believe. (The folks at Long-Term Capital Management learned this hard lesson rather publicly.)

A survey of topics of interest follows in the next handful of chapters. The material on value at risk, the GARCH volatility model and exotic options is somewhat superficial. The careless reader will come away feeling he knows quite a bit more than he really does.

Martingale theory is touched on in 21 and the Girsanov Theorem is alluded to, but these topics are really too complex and require too many prerequisites for proper treatment in the context. A general multi-variate version of Ito's Rule is stated in the appendix of this chapter.

The next section of the book deals with term-structure models and their applications. One-factor models are discussed along with the various limitations of each of these models. This gives a nice historical treatment. The Heath-Jarrow-Morton and Libor Market Model k-factor term-structure frameworks are introduced. Without the supporting martingale theory, the analysis of these models presented here is very limited.

The last several chapters of the text are very survey-like and breezily touch on topics such as credit risk, credit derivatives and energy derivatives. There isn't a lot of theory in these chapters at all, but at least the reader is made aware of the existence of these kinds of contingencies.

The book wraps up with a cautionary chapter in the form of lessons learned. The unwary reader might see all of the derivative-related train wrecks and say to himself "well, that won't be me". The problem is that it really might be you if you truly (and foolishly) still believe the equity prices always follow geometric Brownian motion. See Lo & MacKinlay "A Non-Random Walk Down Wall Street" for an excellent exposition into the limitations of the basic assumptions underpinning the Black-Scholes-Merton theory.

If nothing else, Hull's last chapter should convince you that maybe this isn't the only book you'll ever want to read in your study of mathematical finance.

As the title of this review indicates, this is _the_ book out of many for financial derivatives. It is by no means the only thing you'll need, but it is a great book for a solid foundation in the subject. In short, this book should adorn every finance dork's library.

N.

Both academics and financial practitioners (particularly those who are involved in derivatives) must have a copy on their shelf. It serves as a useful reference to refresh any fading memory since it is quite comprehensive and covers practically the whole spectrum of derivatives.

For undergraduates, there is another version entitled "Fundamentals of Futures and Options Markets" which is highly regarded the standard text for any derivatives course !

Prof. Hull writes a comprehesive and complete work on the subject matter. However, it is intended for and heavily emphasizes the mathematics rather than practical use. For instance, included is a very elegant presentation of the Black-Scholes formula's proof. How often do you need those kinds of things in real life? Probably slightly more than you need the complete explanation of "generalized autoregressive conditional hetroskedasticity" to better grasp volatility mean reversion.

As a Canadian professor, he conveys much broader attention and respect to non-US trading venues and instruments. His writing does tend to become classroom like and is not filled with many trading examples or wit.

In sum, I enjoyed his book and will likely use it as reference material in the future. However, its not a truly "applied" reading.

Despite a wide coverage of topics, the book is way over priced. It is written at purely academic level and of limited use to practioners, quants, and traders who want to use and develop derivatives models. The books focuses on theory and the material is too simplistic. Important details on how to use or implement the models in practice is completely lacking. For instance, the book does not discuss the details for how to actually calibrate the parameters of the models to actual market data.

If you want to learn the material in detail and how derivatives securities are actually modeled and implemented in practice using real-world data, I would strongly recommend a book like Modeling Derivatives in C++ or Principles of Financial Engineering.

This book is just great. I just wish there could be a new edition that incorpoarate the BICs paradigm. More info on BICs can be found at http://www.4bics.org - BICs appears to be a too important concept to ignore,I understand its very recent but I hope prof hull will think about it

This is a great manual for market practitioners. It does not use detailed math, does not go into issues of corporate finance. But it is very easy to follow and it is "complete". More than that, the book is to the point and very clear. Market professionals will find the examples spread around the book very useful for their daily work. The surprising new book by Nefci which I just got, but did not have time to study in detail, seem to provide all the missing links.

I had used an earlier edition of Hull, and it appears that John Hull adds all the relevant material needed for market finance with each new edition. In fact I have purchased several books on Mathematical Finance and Derivatives but few of them remain on my desk for future consultation.

I am a huge fan of this book. The fourth edition was the single most influential text in my study for my MBA. It opened new kinds of thinking for me and helped me understand the intuitions and they methods for valuing the various kinds of derivatives. While the language is not simple, it is not arcane. Some complain that the mathematics are not rigorous. So what? There are such books on the market and are suitable for those that want them. This is the standard book for thousands of MBAs who need a solid foundation, but do not need to be able to higher math to understand how a binomial tree works or to even create one my hand. Certainly, it is helpful to understand the math as deeply as you can. However, the reality is that most of the time practitioners use pre-made tools to run their Monte Carlo simulations rather than programming from scratch.

There are several new chapters on very helpful and interesting topics (using futures for hedging, numerical procedures, swaps, credit risk, real options, insurance, derivative crises, and more). Some of this is new and some adapted from previous editions. Other material has been rewritten and clarified.

DerivaGem 1.5 is included with the book, but a URL is provided to get the latest version from Prof. Hull's website.

This is a terrific book and I consider it one of the most valuable on my shelf of business texts. It is one I would never want to be without and one of the few I am willing to keep up with the new editions. While no book is perfect for every use in every situation, this is one of the great foundation texts.

This is the bible of options and futures markets. It is very well written, clear, and relatively easy to understand. However, you have to read it carefully as it minces its words. Every sentence is packed with information and is important. You may find `easier' books, but they will not go the distance. So, save your money and get the best of them all. Risk Magazine lists this book as #4 among most widely cited papers/books between 1988 and 2003. No surprise there!

This is a solid and intuitive book on Derivatives. If you need an intro, this is the way to go. If you need something with measures and topological spaces look into Karatzas. I believe this book has all the required material for a quant, at an early stage. However some of the Fixed Income discussions lack intuition, for example the discussions on Duration are not in depth and not as good as some of the other books with a focus on Fixed Income. The discussions on Fixed Income instruments are weak in general, for example, mortgages are barely touched on -only a couple of pages.
Discussions on Credit are also lacking depth


Generally a good source for a beginner quant, also a good quant reference. However not a good source for learning Fixed Income
e.

Hull's book is an overview of derivatives using simple examples and scaled down math. The book could benefit from the use of PDEs and more practical examples of applications.

Despite those shortcomings, this is still the best overall introduction to this subject on the market. The only serious drawback is ignoring the substantial risks and value dislocations due to documentation in the derivatives market.

Applications and documentation risks are clearly explained for one of these products in Tavakoli's "Credit Derivatives" (2nd Edition). For professionals who want to know how to apply derivatives in structured finance, I highly recommend Tavakoli's just released book: "Collateralized Debt Obligations and Structured Finance".

John Hull wrote the best work on options and other derivatives. This is the book which will explain to the reader the fascinating world of derivatives and is a great introductory stuff. By no means you should think that this book is just an introduction to the subject. While it starts with assuming that the reader does not have any background on the subject, it goes on deeper into all the instruments.

By now Hull is a classic and most of the teachers of derivatives know the book. But in case you are a student looking for a good book on derivatives you should buy this one. It starts with forwards, futures and goes deep into the futures markets, giving tables, newspaper quotes etc which really help in understanding the topic. then, we go on to options. various types of options, exotic options are all covered. the pricing of options is taken up next and the black-sholes equation explation of hull is excellent. in case you are not very comfortable with numbers and calculus,you can easily skip that stuff by just reading about the pricing model. binomian trees are also well covered. swaps and types of swaps are well covered.

One area that Hull might want to improve upon is the addition of new derivatives like Credit Derivatives, WEather Derivatives in the book. Maybe a bit more info on VaR modelling etc could be given. All in all, this is a great book on options and other derivative securities.

The book has its merits- it is comprehensive, has all the right materials, and also the derivations of all the complicated formulae. However, the manner in which the material is presented can only be described as unimaginative. There is a constant stream of cross-references throughout the book, which will leave the reader feeling frustrated. The book goes forward in fits and starts and there is a distinct lack of cohesion in the treatise. Also, the book assumes that the reader is not mathematically sophisticated, but uses shortcuts and jumps computational steps regularly, which adds to the students' woes. The description of the different types of options are pleasant to read, and so also is the chapter on value at risk, but the rest of the book leaves the students confused. To read this book, the reader should be adept in using standard mathematical tools like arithmetic and algebra and also be somewhat proficient in probability. However, this book is great for practitioners. I have simulated all sorts of options scenarios, from simple Black-Scholes model, to the AMM approach, barrier options and multinomial models. For each of these models I found direct or indirect help from the Hull book. For beginners, I would recommend the book by Jarrow and Turnbull and advise them to keep this book as a reference for the future.

The book is written in arcane language. If you know nothing about futures for example, this book will make you even more confused. There is undoubtedly a great theoretical value to the book, so if you want to pursue a career in academic finance you definitely need to peruse this book.

Terrible book. A dead end as far as theory or practice go. Like a chinese meal, it's ok while it lasts, but you will quickly need more. It doesn't help you make progress. The numerical methods are antique. Best books are Nefci and Wilmott. Nefci for probability theory and Wilmott for applied math. Don't buy this garbage, it impedes progress.

What is this book supposed to be for?

Practical? No way. Too abstract for sales. Too naive for a trader or quant.

For probability theorists? Hull doesnt understand probability or risk neutrality.

PDEs? No sign of them.

Numerical methods? Embarrassing and out of date.

When this book first came out it was great. But it hasnt aged well. If you admit to liking this book then you are a dinosaur.

I loved the overview of derivatives products as well as the problem sets, which help to clarify (or review) one's grasp of the concepts. I'm a derivatives professional, but find I use this book as a frequent reference.

I also recommend Tavakoli's book: "Credit Derivatives". The coverage in Hull's book was light, especially on the various types applications. I especially found Tavakoli's explanation of hedge funds use of credit derivatives and leverage of interest.

I took Prof Hull's Advanced Risk Management class a few years ago with lecture notes. I also have the previous edition of this book, but I still bought this one. It took me three days to read the book cover-to-cover, and I have to say I still enjoy reading it very much. Assuming minimum math background (basic calculus and prob theory), Prof Hull introduced the world of derivatives, pricing, risk mgmt in plain English. By far, it's still the best introductory level book on derivatives, with balanced treatment of pde and risk-neutral valuation (not like Wilmott's book - almost 100% pde and ignoring risk-neutral altogether). For a bit more advanced reading, Neftci's Intro to Math of Derivatives is a good one. However, to have a complete picture of derivatives pricing, stochastic calculus (at the level of Karatzas & Shreve' Brownian Motion and Stochastic Calculus) is a must, which will instead need a fair exposure to real analysis, measure-theory level prob theory, and ode/pde. For readers who want some knowledge of derivatives but don't want to be quant, Hull's book pretty much tells you everything you ever want to know about derivatives.