Help!! American binary option value?

NotTooBad · March 8th, 2005, 2:56 am

A stock is now traded at 100. An european binary option that pays off 1 if stock price ends up above 110 (and 0 otherwise) is worth 0.3 now.How much would an American binary option with same strike and payoff function worth?

gjlipman · March 8th, 2005, 7:41 am

You can find the formula at http://www.global-derivatives.com/optio ... ptions.php.

StrongBid · June 5th, 2006, 12:04 pm

Is there anyone out there who knows this formula well and is interested in doing some consulting?I'm trying to write a program for trading binary options on www.intrade.com and just need help understanding a few nuances.Thanks........ Bob,Email: xtrade (@) mailvault . com

friesenjung · June 5th, 2006, 12:52 pm

One can trade american digitals on intrade.com?

list · June 5th, 2006, 1:28 pm

Take a look at http://papers.ssrn.com/sol3/papers.cfm? ... _id=844484 or more extended http://papers.ssrn.com/sol3/papers.cfm? ... 11.Regards

blang · June 6th, 2006, 6:55 pm

are you talking about one-touch option? get 1 dollar pay off whenever the underlying exceed the strike?

StrongBid · June 6th, 2006, 7:35 pm

Actually I'm talking about the DOW.HIGHER contracts on www.intrade.comI'm trying to figure out how to calculate fair value for them.The attached spreadsheet shows the variables and what I am trying to achieve.I'm hoping there's a quant out there who does consulting on the side and can help....

kritchey · June 7th, 2006, 2:48 pm

I think the intrade.com options are European exercise. The options are automatically exercised at the expiration.

StrongBid · June 7th, 2006, 2:55 pm

Yes you're right. Intrade's contracts are european exercise. My goal was to figure out how to value them and for some reaon I couldn't create a new binary options thread...this "American" thread was the only option.