I'm trying to compute the implied volatility of a binary option but I cannot get some of the strikes to reach a convergent solution using either a Monte Carlo pricing model or an analytical Black ...
Firstly, I do not have a quant finance background. This is new to me, and I imagine that this is a basic question for this group. I am calculating the price of a binary/digital option with ...
Could anyone please direct me to literature or methods for extrapolating the implied volatility surface towards small expiry? I'm looking to price very short time to expiry binary options (e.g. 5 ...
A binary option with payout \$0/\$100 is trading at \$30 with 12 hours to expiration. Assuming the underlying follows a geometric Brownian motion (hence volatility remains constant), what ...
In theory, how should volatility affect the price of a binary option? A typical out the money option has more extrinsic value and therefore volatility plays a much more noticeable factor. Now let's ...
I want to create a position that either multiplies with $1+u$ (outcome $U$) or $1-d$ (outcome $D$). The probability of $U$ is denoted by $P(U) = \pi$. The initial value of the position is $V_0$. Given ...
Reading from "www.nadex.com" - the copy reads "Binaries are similar to traditional options but with one key difference: their final settlement value will be 0 or 100. This means your maximum risk and ...