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A double digital option is a particular variety of option (a financial derivative). At maturity, the payoff is 1 if the spot price of the underlying asset is between two numbers, the lower and upper strikes of the option; otherwise, it is 0.
A double digital option is similar to the exotic option with a few exceptions. for instance a double digital option has two strike prices that is the expected price during the trade season. The option has two types of strikes namely the lower and the upper strikes.[1]
A double digital with lower strike K1 and upper strike K2 can be replicated by going long a digital option with strike K1 and short another digital option with strike K2.[2]
References
edit- ^ "Exotic And Double Digital Options". BOB. May 18, 2013. Retrieved 11 July 2013.
- ^ Park, Bearbear. "An Introduction to Quantitative Finance".
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