Errata/Typos - Dan Stefanica's Math Primer book

[dstefan]

The typos found by Mr. Mark Li are now included below.

[dstefan]

Page 16, Chapter 0, Exercise 4, part (iii): the sequence should be denoted and not

Page 42, Section 1.12, Exercise 8: The sentence ``When scaled appropriately, the derivative of f(y) with respect to y give the duration and convexity of the bond" should be ``When scaled appropriately, and give the duration and convexity of the bond, respectively"

Page 55, Section 2.4 (thanks to Mark): On line 9 from the bottom, should be

Page 57, Section 2.5 (thanks to Tom): the term in formula (2.28) should be ; the term in formula (2.29) should be ; the term in the last formula on page 57 should be

Page 58, Section 2.5 (thanks to Tom): the inequality should be

Page 62, Section 2.5.2 (thanks to Carl): the tolerance is , not .

Page 77, Section 2.8 (thanks to Eugene): y = 0.065, not y = 0.06

Page 78, Chapter 2, Exercise 2, part(i): formula
should be


Page 85, Section 3.2: in the statement of Lemma 3.4 should be

Page 110, Section 3.8 (thanks to Prashant): the value of the put is P = 2.343020, not P = 2.343022.

Page 111, Section 3.10 (thanks to Vic), Exercise 4 (iv): formula should be

Page 123, Section 4.3 (thanks to Mark): In Theorem 4.1, formula

should be


Page 126, Section 4.3 (thanks to Vic): In Theorem 4.3, the sentence ``Then is a lognormal variable..." should be ``Then is a lognormal variable..."; also the last sentence in the proof of Theorem 4.3 should read ``which shows that is a lognormal random variable...", instead of ``which shows that is a lognormal random variable..."

Page 179, Section 5.1 (thanks to Mark): Formula (6.10) should be


Page 222, Section 7.7 (thanks to Pravit): Formula (7.36) should read

Page 231, Exercise 4, Chapter 7, the formula for b should read


Page 233, Exercise 6, Chapter 7: the first sentence on page 233 should read ``Thus, the value V(S,I,t) of an Asian option depends not only on the spot price S of the underlying asset and on the time t, but also on the following random variable:


Page 233, Exercise 7, Chapter 7: ``Fill in the Black--Scholes values of the OTM put options..." should be ``Fill in the Black--Scholes values of the ITM put options..." After the table, the sentence ``For which of these options is the intrinsic value larger than the price of the option" should be ``For which of these options is the intrinsic value larger than the Black--Scholes value of the option"

Page 233, Exercise 8, Chapter 7: ``Show that the premium of the price of a European call option..." should be ``Show that the premium of the Black--Scholes value of a European call option..."

Page 233, Exercise 9, Chapter 7: ``Use formula (7.41) to price a six months down--and--out call..." should be ``Use formula (7.41) to find the value of a six months down--and--out call..."

Page 248, Section 8.2.1 (thanks to Carl): the number of iterations in the bisection method is 35, not 33

Page 252, Section 8.2.2 (thanks to Eugene): The sentence
``For example, if , then "
should read
``For example, if , then "

Page 263, Section 8.4: On the seond row, should be [B]

Page 264, Section 8.4: The Note at the bottom of the page should read ``Note that
is twice the covariance matrix of the rates of return , which is a positive definite matrix"

Page 271, Section 8.7: the last term of formula (8.78) should be , not

[doug reich]

I believe Eugene Krel observed that on page 77, in the "Answer" below the pseudocode, y=0.06 is given, but y=0.065 is used in the computation.

Ross noticed a missing absolute value bar after in the statement of Lemma 3.4 on page 85 (third line in the paragraph: "...that . ..."

[Carl]

I believe that there is a typo on page 62.

Given the results in the table, and the definition of tolerance in 2.34 (and the paragraph preceeding it), I think the tolerance of the approximation should be , not .

-carl

[Eugene Krel]

On page 252 the book says that it uses x0 = .001, but the iterations posted are for x0 = .01.

For x0=.001 newton's method converges in 25 iterations.

[Tom Gleeson]

pg. 57 in formula (2.28) T s/b M ; in formula (2.29) M s/b T
In the formulas that follow on the bottom of pg. 57 and top of pg. 58, T s/b M

[dstefan]

thanks, Tom!

[Victor]

page 111, first formula from the bottom, section 3.10, exercise 4 part IV:
should end with = e^(-at) instead of e^(at)

[Victor]

correct me if I am wrong, but on page 126, Theorem 4.3 should say "Then Y1*Y2.." instead "Then ln(Y1*Y2)..". and also at the end of the proof instead of "which show that ln(Y1*Y2).."

[dstefan]

Thanks, Vic - you are correct on both accounts.

[dmukhin]

This is just a comment on the algorithm for computing an approximate value of an intergral with a given tolarance (p. 61 - 62). There is no need for additional storage to save all the values of f(a_n,i). The value of I_T(2n) can be comuted given I_T(n) as
2*I_T(2n) = I_T(n) + h*SUM_1_n(f(a + (i - 0.5)*h)) where h = (b-a)/n

[dmukhin]

... a more readable version of the previous post


In terms of the algorithm in table 2.4. I_new is computed based on I_old plus the sum of the new points. Since I_old is already stored no new storage is needed.

[dmukhin]

Page 65. Formulas (2.43) and (2.44) require both and . Is it really necessary? Can't (2.43) be used, for example, to find a present value of cash deposit made in the past?

[billy d]

On the Solutions Manual on top of pg. 6, the characteristic polynomial should be P(z) = z^3-2z-1

---------- Post added at 11:49 AM ---------- Previous post was at 11:05 AM ----------

On the Solutions Manual for Problem 15, It should say that P=4; C=2 and q=0.187 for the problem to work correctly. Otherwise the whole problem changes and you need to take the opposite positions.

[fegbawe]

Problem 8 in HW1 did not specify the risk free rate. Shouldn't we need it for the resolution of the problem?

[amanda.jayne]

Pg. 55



should read

[dstefan]

See attached for the July 2010 version of the Errata for "A Primer for the Mathematics of Financial Engineering". And many thanks to everyone who pointed out typos from the book!