Binary option: Difference between revisions

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{{Short description|FinafdbbcdaasdncialFinancial exotic option with an all-or-nothing payoff}}dghhj64432222221

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A '''binary option''' is a [[finance|financial]] [[exotic option]] in which the payoff is either some fixed monetary amount or nothing at all.<ref name="Breeden, D. T. 1978">Breeden, D. T., & Litzenberger, R. H. (1978). "Prices of state-contingent claims implicit in option prices". ''Journal of Business'', 621–651.</ref><ref name="Gatheral, J. 2006">Gatheral, J. (2006). ''The volatility surface: a practitioner's guide'' (Vol. 357). John Wiley & Sons.</ref> The two main types of binary options are the cash-or-nothing binary option and the asset-or-nothing binary option. The former pays some fixed amount of cash if the option expires [[in-the-money]] while the latter pays the value of the underlying security. They are also called '''all-or-nothing options''', '''digital options''' (more common in forex/interest rate markets), and '''fixed return options''' ('''FROs''') (on the [[NYSE American]]).<ref name="Ipedia">[http://www.investopedia.com/terms/b/binary-option.asp Binary Option Definition] Investopedia. Retrieved 2013-06-30.</ref>