Gamma of a digital option trading strategies product


To extend the discussion to the barrier trades, a barrier trade can be viewed as a combination of an option spread and an option. I am just short the profit at the moment. Ofcourse, Not all trades require pre approval esp. Managing the risks of a multi asset trade with illiquid stocks as undeliers would be the most difficult. If he's not comfortable with either of the two, he may not approve it.

As an example let's consider a binary option in the figure below booked as a call spread. For example an up and in call option can be booked and hedged as a combination of a call spread with strikes being barrier and barrier - overdhedge and a call option with strike equal to the barrier level. I'm never likely to go there.

For new payoffs the trader will come up wth an overall hedging strategy for the trade. As an example let's consider a binary option in the figure below booked as a call spread. A physicist thinks reality is an approximation to his equations.

Number of underliers to the trade and whether these underliers are liquid indices or thinly traded stocks. Some of the factors that are considered are: A mathematician doesn't care. And yes it happens, with virtually any payoff possible in the OTC equity gamma of a digital option trading strategies product markets, the bank will not always have the model to handle the trade. When a new trade comes to the risk manager in a bank for approval, he tries to determine both the quality and the quantity of the risks inherent in the trade.

Often the most important aspects of the hedging strategy revolves around managing greeks around discontinuities or barriers. What the trader achieves by doing so is a smoother set of greeks specially the delta. Whether the bank has a model to price and determine the risk of the trade.

Managing gamma of a digital option trading strategies product risks of a multi asset trade with illiquid stocks as undeliers would be the most difficult. A mathematician doesn't care. Discontinuities in the payoff. When a new trade comes to the risk manager in a bank for approval, he tries to determine both the quality and the quantity of the risks inherent in the trade. For example an up and in call option can be booked and hedged as a combination of a call spread with strikes being barrier and barrier - overdhedge and a call option with strike equal to the barrier level.

Managing risks of Digital payoffs - Overhedging 3. What this means is that when a buyer comes to a bank with a price request for a digital option, the bank actually quotes price for a call spread. Whether the bank has a model to price and determine the risk of the trade.

A physicist thinks reality is an approximation to his equations. I am just short the profit at the moment. When a new trade comes to the risk manager in a bank for approval, he tries to determine both the quality and the quantity of the risks inherent in the trade. For new payoffs the trader will come up wth an overall hedging strategy for the trade. Discontinuities in the payoff.

Often the most important aspects of the hedging strategy revolves around managing greeks around discontinuities or barriers. For example an up and in call option can be booked and hedged as a combination of a call spread with strikes being barrier and barrier - overdhedge and a call option with strike equal to the barrier level. And yes it happens, with virtually any payoff possible in the OTC equity derivatives markets, the bank will not always have the model to handle the trade. As an gamma of a digital option trading strategies product let's consider a binary option in the figure below booked as a call spread.