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Episode 7: Digital Options and Binary Payoffs
Digital options pay a fixed amount if a condition is met and nothing if it is not. This episode explains their discontinuous payoff, pricing behaviour and concentrated risk around the strike.This episode is part of FX Options Daily, a 30-day themed season of The Trading Floor covering pricing, hedging, exotics, risk and institutional FX options practice.Full treatment: Chapter 7 of FX Options.Educational content only. Nothing in this episode constitutes investment advice.
The skinny
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