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Quanto Binary Options
I am trying to come up with a methodlogy to book Quanto Binary Options, using call spreads (C(K-d)-C(k))/d. My question is how do you come up with a "robust" methodlogy for the diferrence of the two strikes used in the calls (i.e. d). I was thinking of using the daily 1 standard deviation, but is there another way?
Quanto Binary Options
Shouldn't d be as small as possible so as to replicate the derivative of C(k).