Double digital option

4 stars based on 61 reviews

A double digital option is a particular variety of option a financial derivative. At maturity, european digital call option payoff is 1 if the spot price of the underlying asset is between two numbers, the lower and upper strikes of the option; otherwise, it is 0. A double digital option is similar to the exotic option with a few exceptions. The option has two types of strikes namely the lower and the upper strikes. A double digital with lower strike K 1 and upper strike K 2 can be replicated by going long a digital option with strike K 1 and short another digital option with strike K 2.

From Wikipedia, the free encyclopedia. This article has multiple issues. Please help improve it or discuss these issues on the talk page. Learn how and when to remove these template messages. This article european digital call option an orphanas no other articles link to it. Please introduce links to this page from related articles ; try the Find link tool for suggestions. This article european digital call option additional citations for verification.

Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. September Learn how and when to remove this template message. Retrieved 11 July Retrieved from " https: Options finance Finance stubs. Orphaned articles from May All orphaned articles Articles needing additional references from September All articles needing additional references Articles with multiple maintenance issues All european digital call option articles.

Views Read Edit View history. This page was last edited on 26 Mayat By using this site, you agree to the Terms of Use and Privacy Policy. This finance -related article is a stub.

You can help Wikipedia by expanding it.

Indicadores forex descarga

  • Option trading hours dubai financial market

    Crypto trading app canada

  • Best way to trade oil futures in indianapolis

    Introduction to trading eurodollar futures

Automated binary option trading

  • Fut trading tbinary optionsps deutsch

    Binary options australia 60s strategy youtube

  • Understanding binary trading strategy pdf

    See binary option trading signals youtube

  • Price of oil and gas dubai jobs 2016

    Binare optionen gewinn

Cheapest options trading brokers

47 comments Cfos fx launches online forex option trading 43a

2 option binary broker comparison

This post is based on problems 2. I was asked how to price a digital option in a job interview - and had no idea what to do! A call is only worth exercising using if the underlying price, , is greater than at , as the payoff from exercising is. A digital call option with is similar - it pays off one dollar if at expiration, and pays off zero otherwise:.

Suppose you have a model for pricing regular call options. How can you use to price the digital option? As a starting point, consider buying a call with and selling a call with:. This is close to the digital option, but not exactly right. We want to make the slope at steeper, so we need to buy more options.

Consider buying two calls with and selling two calls at:. As opposed to a slope of 1 between and , now we have a slope of two between and Generalizing this idea - consider a number.

To get a slope of , you buy calls at and you sell calls at. How much will the above portfolio cost? You earn from selling the calls, and pay for the calls. The net cost is: Many complicated payoffs can be re-created as combinations of vanilla puts and calls. Digital Call Options A digital call option with is similar - it pays off one dollar if at expiration, and pays off zero otherwise: As a starting point, consider buying a call with and selling a call with: Consider buying two calls with and selling two calls at: Given that the slope is , to get an infinite slope, we take the limit as goes to zero.

It might look more familiar if I re-wrote it as: Conclusion Many complicated payoffs can be re-created as combinations of vanilla puts and calls.